Rise in inflation fails to rattle MPC

The Monetary Policy Committee (MPC) appears, more than ever, to be in wait and see mode. A number of uncertainties – such as the severity of the upcoming fiscal squeeze and the impact of recent events in the euro-zone on the UK – argue for keeping policy on hold for now. But if both we and the MPC are right about the inflation outlook, additional policy support is likely to be needed later this year.

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