Comments: Bank hikes to 5.5%, warns of risks

Dear David,
The MPCís central inflation projection (February 2007 Inflation Report) for the 2nd quarter of 2007 is 2.56% (in line with the marketís prediction). The central projection drops to 2.06% by the end of 2007. The Inflation Report also records an inflation risk which is lower than what the central projection suggests. Todayís statement changes all the above. It hints that the May Inflation report (next week) will revise upwards the central projection and the risk of inflation in the medium term; this leaves room for speculation that another interest rate increase is likely during summer.
Many thanks

Posted by Costas Milas at May 10, 2007 04:06 PM

With the statement still predicting a fall in CPI back to around 2% this year, surely one more hike as implied by the futures markets should be the peak in rates? Or do you think we get more? I think the "risks remain to the upside" narrative is a red herring - with inflation at 3.1% now, how could they say anything but that....

As for songs for Gordon Brown to enter to - "Send in the Clowns" seems very appropriate - looking forward to getting my prize!


Posted by Simon at May 11, 2007 08:09 AM
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