The Bank of England has warned that the inflation rate could reach 4% by the end of the year. This is double that of its normal inflation target. But for now, the bank will keep interest rates the same after a 7-1 vote. The inflation is caused by volatility in the energy and commodity sectors due to COVID-19. It is worsened because of transportation bottlenecks into Britain.
The Monetary Policy Commission stated that it does not intend to raise rates as yet because it did not want to put “undue weight on capacity pressures that are frictional…and likely…temporary”.
But it later said that it is likely that “some modest rightening of monetary policy” from its current rate of 0.1% will “likely be necessary” to meet its inflation target of 2% in the medium term.
The Bank’s Governo...