Bank of England chief: Inflation is a global threat
Bank of England governor Mervyn King today said the threat of higher inflation around the world was creating uncertainty for the global economy.
Mr King told an influential group of MPs that the soaring costs of oil and gas put pressure on central banks to raise interest rates to cal inflation.
Fears over the impact of rising inflation have played havoc with stock markets around the world in recent weeks, with London’s FTSE 100 Index among those hit.
Mr King said the decision for policymakers in the United States was particularly difficult because inflationary pressures were rising despite weakening domestic demands and a slowing economy.
The US Federal Reserve is expected to put up interest rates today but in a sign that no such change was imminent in the UK, Mr King said little had changed since May when the Bank published its latest quarterly inflation report.
In the report, the Bank said inflation would be above its 2% target in two years if borrowing costs remain at their current level of 4.5%.
But despite the warning, the Bank’s Monetary Policy Committee kept interest rates on hold this month at 4.5% – where they have been since last August.
Today Mr King told the Treasury Committee that inflation was still very close to target at 2.2% and added: “I don’t think the picture has changed greatly since May.”
