Interest rate stalemate due to inflation fear, MPC minutes reveal

Summary

The Bank of england  monetary policy committee maintained its 6-3 split in favour of keeping interest rate on hold earlier this month. The reason for that is because the inflation that hit 5.3% in April was not enough to warrant a rate rise. The committee noted that soaring oil and other commodity prices would cause inflation to rise more than forecast in its February inflation report and could breach 5% in the next few months. Inflation unexpectedly dropped 4% in march but the MPC said this was hard to interpret until more detail became available, according to the minutes.

Connections

Gas played a huge role during inflation since the price of gas skyrockted alot in the past couple of months, due to the large amount of money supply that flows into the economy. For the money supply to change bank reserves would have to be raised. Because most of the time bank reserves would highly influence how the economy goes.

Reflection

The reason that england did not want an increase in bank rate was because the wage growth was still remained low. Also it was still to early to make any changes because they did not know what was going to happened in a couple of months due to inflation. Since alot of markets crashed and the price might changed any moment. So therefore if the bank did raise interest rates and the inflation rate changes it would be a huge hassle for them because they would need to make alot of changes.