Outdated maps
The battle against inflation is becoming more complicated and the Bank of England has changed its approach
INTEREST rates stayed on hold last week, but the latest quarterly Inflation Report from the Bank of England implies that they will have to rise by another half point in order to keep inflation on target at 2.5%. The report's central projection is that, if base rates stay at 6.0%, inflation will rise from 2.2% now to 2.7% in two years' time (see chart). This projected overshoot is the biggest in any inflation report in the past three years. It suggests that the effect of the divisions on the Monetary Policy Committee (MPC) has been to reduce the role of the inflation forecast in setting interest rates.
This article appeared in the Britain section of the print edition under the headline “Outdated maps”
From the August 12th 2000 edition
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