‘Inflation will fall to 2% in summer’

Inflation will come down to around two per cent later this year, according to a member of the Bank of England’s monetary policy committee (MPC).

David Blanchflower, speaking at Stirling University yesterday, said the MPC had in his opinion underestimated the strength of the British economy.

He told his audience that he felt the economy had “a slightly greater margin of spare resources” than the MPC did.

Further, he added that he felt there was also “both greater spare capacity within businesses, and a greater degree of slack in the labour market”.

At the latest meeting of the MPC, Mr Blanchflower was one of seven to oppose another rise in the base rate.

The MPC has voted to raise the base rate three times since last August and Mr Blanchflower has opposed the move on each occasion.

Raising the base rate is a method used by the MPC to attempt to stifle the rise of inflation, which recently has been running close to a three per cent upper limit set by chancellor Gordon Brown.

© Adfero Ltd

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