LONDON (Reuters) -The Bank of England increased its forecast for inflation to rise further above its 2% target, saying it was now likely to peak above 3% but that would only be for a “temporary period” and it would keep a close eye on medium-term inflation expectations.
The BoE’s nine monetary policymakers voted 8-1 to keep its government bond-buying programme at 875 billion pounds ($1.22 trillion). They voted 9-0 in favour of keeping its corporate bond programme at 20 billion pounds.
Chief Economist Andy Haldane, who leaves the BoE later this month, voted for a second meeting in a row to scale back the bond-buying plan by 50 billion pounds.
The Monetary Policy Committee voted 9-0 to keep Bank Rate unchanged.
“Building global input cost pressures had increasingly been passed through into manufacturing output prices and non-oil import prices,” the BoE said in minutes of its meeting.
“CPI inflation was expected to pick up further above the target, owing primarily to developments in energy and other commodity prices, and was likely to exceed 3% for a temporary period, peaking higher than previously thought.”
Economists taking part in a Reuters poll had expected no policy changes by the BoE as it waits to see if a post-lockdown jump in inflation proves transitory and whether unemployment rises when the government scales back its job-protection scheme.
Last week, the U.S. Federal Reserve began to move towards reducing its pandemic stimulus by signalling its first rate hike in 2023, a year earlier than previous projections, putting the focus on what other central banks might do next.
(Reporting by David Milliken and Andy Bruce; editing by Michael Holden)
