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A difference of opinion at the Bank of England

Adam Posen, one of the members of the MPC, has today issued a statement suggesting he is not in full agreement with Mervyn King, the governor of the Bank of England, with regards to the reasons why UK inflation has suddenly come to life. This is the first crack in the united front from the MPC and would appear to suggest there are differing opinions under the surface although in reality surely this is exactly what a committee should do?

Mervyn King has for some time now suggested that inflationary pressure in the UK was purely and simply linked to a number of one-off issues which have arisen over the last two years. While there's no doubt that increases in VAT and the effect of higher oil prices have played a part in the increase in inflation this is possibly not the overall picture. Adam Posen believes there has been an "unanchoring" of inflation expectations and possibly targets issued by the Bank of England should have been revised.

It will be interesting to see exactly how inflation performs in the short to medium term and whether in fact the Bank of England is forced to revise its 2% target.

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