Carney reveals United Kingdom inflation expectations

Carney reveals United Kingdom inflation expectations

The Office for National Statistics said consumer price inflation was 3% in the year to September, up from the previous month's 2.9%.

In a speech the following day, external MPC member Gertjan Vlieghe - considered one of the most dovish members of the council - told his audience that "the evolution of the data is increasingly suggesting that we are approaching the moment when Bank Rate may need to early as the coming months".

The CPI data this morning revealed that prices of consumer goods, boosted by food and transport, are climbing at their highest rate since 2012.

Some market watchers think the bank will hike rates form their current record low of 0.25% to 0.5% at its upcoming meeting in November, in what would be the first increase in borrowing costs in nearly a decade.

The latest inflation data makes a rise "near certainty", according to Matthew Brittain, investment analyst at Sanlam UK.

The governor would not be drawn on the likelihood of interest rates rising in November, but said the challenge the central bank faces is to strike a balance between putting rates up to ease inflationary pressure in the economy, and keeping monetary policy loose to aide the economy in times of economic strife.

That "coming months" could turn out to be coming "month".

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There is an 80 per cent chance of the base rate rising in November from its current rate of 0.25 per cent, according to financial markets.

BOE deputy Governor Dave Ramsden was answering United Kingdom lawmaker's questions in a parliamentary committee, alongside new external BOE policy setting member, Silvana Tenreyro. "We will be back to normal, let's say, in terms of the trade-off without that depreciation effect". Last month the BoE said it expected inflation to exceed 3 per cent in October, higher than it had forecast just a month before, when it predicted it would take more than three years for inflation to return to its 2 per cent target.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "The Bank of England will be wary of the fragile state of the United Kingdom consumer as it mulls its next move on interest rates".

But sterling fell against the US dollar on Tuesday and British government bond yields also declined after the comments from Ramsden and Tenreyro which suggested a BoE hike in November might be less of a clear-cut conclusion.

Brexit was also a hot topic in the committee's meeting, as Carney warned against moving clearing out of London.

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