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MPC dove predicts rapid inflation fall

Inflation will fall to the two per cent target by the summer, monetary policy committee (MPC) member David Blanchflower believes.In a speech last night at the University of Stirling, the MPC's leading dove indicated his continued commitment to fighting the next rate hike, widely expected to take place during the next quarter.The Bank of England's MPC has voted to raise interest rates three times in the past six months amid fears of escalating inflationary pressures.But on each of these occasions â€" in August, November and January â€" Mr Blanchflower has opposed such a rise.Last night he argued that the UK's future economic growth had greater potential than the Bank believed."My own particular view is that there is a slightly greater margin of spare resources in the economy than embodied in the central projection, reflecting both greater spare capacity within businesses, and a greater degree of slack in the labour market," he said.Continued non-inflationary growth would help prevent any offset against downward inflation caused by falling energy bills during most of this year, he suggested.Ongoing uncertainty relating to the impact of a strong pound and the wider international situation would affect how soon inflation would reach chancellor Gordon Brown's two per cent target, however.Having risen from 2.4 per cent in October last year to three per cent in December, consumer price index (CPI) inflation fell back to 2.7 per cent in January.The Bank's quarterly inflation report, published earlier this month, predicted that CPI inflation would settle back around the two per cent mark in the medium term.

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