The Bank of England's arch-dove, Adam Posen, surprisingly dropped his call for an extra £25bn in money printing yesterday as its deputy governor Paul Tucker expressed mounting alarm at lingering inflation.
Mr Posen, a staunch advocate of quantitative easing (QE) for the past 18 months, joined the majority of the Bank's Monetary Policy Committee in sitting on his hands amid "risks that elevated inflation might be more persistent than ... expected". Following his move, only David Miles is now pushing for more QE, although his decision was "finely balanced".
The minutes of the MPC's April meeting were released a day after the consumer prices index inflation benchmark hit 3.5 per cent in March, rising for the first time in six months. Annual CPI still stands at nearly double the MPC's 2 per cent target, spelling lingering misery for millions of households faced with record petrol prices.
Mr Tucker said there had been "bad news on the inflation front" as oil and gas prices have risen 5 per cent since February in sterling terms. The Chancellor also hit smokers with a 37p rise in cigarette duty in the Budget.
Mr Tucker said: "That seems likely to leave the short-term outlook for inflation on a path a little higher than incorporated into the central projection described in the MPC's February Inflation Report. I think inflation might remain above 3 per cent throughout the second quarter of this year, and possibly into the second half of the year."
The MPC, whose February forecasts call for inflation to fall to 2 per cent by the end of this year, is likely to ratchet up its predictions next month.
The Bank also added fuel to rumours of simmering tensions with the Office for National Statistics over the quality of its data, with a dig at the construction figures, which have fallen sharply. The MPC "was minded not to place much weight" on the construction numbers, the minutes said.
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