BoE: Inflation to fall below target if rates remain low

Bank of England's latest Inflation Report predicts inflation will remain above 2% target throughout 2010 but should fall below in longer term

Inflation should stay above the 2% target level throughout the rest of the year, according to the Bank of England’s quarterly Inflation Report, released last week. However, it will fall below target in the longer term if the Bank keeps rates low and maintains its asset purchase programme at £200bn, the report suggests. “Inflation is likely to remain above the 2% target throughout 2010, boosted by the restoration of the standard rate of VAT to 17.5%, the effects of the depreciation of sterling, and the increase in oil prices,” the Bank forecasts. The Bank’s near-term predictions...