MPC will do whatever is needed to get inflation on an even keel

Mervyn King, governor of the Bank of England, says the Monetary Policy Committee will take whatever action is necessary to curb inflation, after it rose to 3.2% in October.

King had to write an open letter to chancellor George Osborne last week explaining why the Consumer Price Index is still more than 1% above the 2% target.

Office of National Statistics fig-ures show inflation increased to 3.2% in October, up from 3.1% in September.

In his letter to Osborne, King defended the MPC’s decision to maintain interest rates and quantitative easing in November.

But he says: “The committee is ready to adjust policy to ensure that the risks to the outlook for inflation in the medium term remain evenly balanced around the 2% target.”

Minutes from November’s MPC meeting show one member voted for an interest rate rise and another to increase quantitative easing. Seven committee members voted to keep interest rates on hold at 0.5% and quantitative easing at £200bn.

But Adam Posen voted for a 0.5% rise and Andrew Sentance voted to increase quantitative easing by £50bn.

Figures released last week also showed that year-on-year the Retail Prices Index rose by 4.6% in Oct-ober, unchanged from September.
King adds that over the next few months inflation might rise further.

Meanwhile, sellers cut asking prices by 3.2% in November, the high-est monthly drop since December 2007, says Rightmove.

Its latest house price index reveals some 24,028 new sellers are coming to market every week, down 9.1% on the previous month yet out-stripping mortgage approvals by two to one.

Melanie Bien, director at Private Finance, says: “The reasons for a slowing market are a lack of mortgage availability and worries about the economy. There are concerns over jobs and economic security.”