Inflation Report Briefing – Feb 2013

Chris Piper, Agent Central Southern Region of the Bank of England, gave his presentation on the Quarterly Inflation Report this morning at the Madjeski Stadium.  Some the key points included:

– Inflation is likely to remain above the 2% target for the next two years.  Interesting to note that the effect of ‘administered and regulated prices’ (eg tuition fees, energy) accounts for approx 1% of the inflation figure.  These prices represent 16% of the ‘basket of goods’ which effectively means it’s more difficult to keep the other 84% within the target.

– GDP growth likely to remain weak in the near term.  GDP is likely to remain below its pre-crisis level until 2015

– Overall output continues to be broadly flat which sits in sharp contrast to continued strong employment growth.  Labour productivity has fallen back to levels last seen in 2005

– Households still not spending.  Businesses waiting for increase in demand to feel confident to invest again

– UK banks’ funding costs have fallen further, aided by the improved financial environment and Funding for Lending scheme.  There’s growing evidence that this is feeding into private sector credit conditions – we will wait and see.