Bank of England Governor Mark Carney is facing a setback as prices rise
Sunday 14 July 2013
Bank of England Governor Mark Carney will be faced with the highest inflation for more than a year this week when figures on the cost of living are published.
Analysts predict Consumer Prices Index inflation of 3 per cent for June, the highest since April last year. This puts the Canadian in danger of being forced to write an open letter to the Chancellor if CPI reaches 3.1 per cent or higher.
The City will also gain its first insight into Mr Carney's voting when minutes of the latest Monetary Policy Committee meeting are published, revealing whether the Governor followed predecessor Sir Mervyn King in voting for more stimulus.
Economists say petrol prices, which rose in June but fell a year earlier, will have pushed up the CPI index last month. Additionally, deep price cuts on the high street 12 months earlier, as shops panicked in response to downpours hitting sales, are unlikely to have been repeated this time, building inflationary pressure.
The MPC published a rare statement alongside its last decision warning that interest rate rises were much further away than money markets expected, sending the pound lower and depressing long-term interest rates.
Capital Economics' Martin Beck said: "Tactically I don't think the Governor will have voted for more stimulus at the meeting because he will have wanted to assess the impact of the statement."
The figures come against the backdrop of an improving economy.
The Ernst & Young ITEM Club has upgraded its growth forecasts from 0.6 per cent to 1.1 per cent this year, and from 1.9 per cent to 2.2 per cent in 2014.
Chief economic adviser Peter Spencer said: "It's looking much more positive."
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