Reaction: Inflation drop could help meet end of year target

16/07/2012

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...strong pound against the euro have contributed to these downward pressures. The rise in sterling could adversely affect competitiveness, but this is likely to be offset by increased demand as a result of lower inflation.

“There is a chance that towards the end of the year or in early 2013, inflation will temporarily fall below the 2% target. This will follow a prolonged period of above target inflation, and should not be a cause for concern for the MPC. While austerity measures are putting downward pressure on demand, there would be nothing wrong with allowing below target inflation to support consumer spending. With this in mind, we believe there is no need for further increases in quantitative easing.”

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