Fisher still expected to vote for further QE, after BoE clarification
Thu 27 Sep 2012
LONDON (SHARECAST) - In remarks to The Sun Bank of England (BoE) policy-maker Paul Fisher indicated that, in his opinion, the worst of these past few years' inflation shock has now passed.
In his own words: “inflation has come down from 5.2 per cent to 2.5 per cent. We expected it to be a bit lower by now, but there’s been a bit of stickiness in world energy prices.
“Another crisis in the Middle East could still blow us off course.
“But the big changes we had to deal with — in energy prices, the one-off change in VAT rates, the effect of imported inflation from the Pound’s depreciation in 2007 and 2008 — these effects have worked their way through the numbers.
“These things have now passed,” he is reported to have stated.
He added that the economy was almost certain to bounce back in the current July to September quarter with “a very strong gross domestic product number”.
In particular, he was said to have remarked that he still expected inflation to remain above-average for a time. More specifically, he was reported to have forecast that the cost of living index will bump along around the current 2.5% mark for about “two to three years.”
Although that is quite a bit lower than the 5.2% rate it reached in September of last year, those remarks could have been quite relevant from the point of view of anticipating his vote at the next MPC meeting, given the Bank of England’s 2% inflation target.
Those weren't his words exactly
It is for that reason that the Bank has issued a clarification of Mr.Fisher’s remarks. What he actually said was: “We are very seldom going to be actually at 2%, we’ll always be a bit away and trying to bring it back. So our forecast has inflation within this sort of range – either a bit above or a bit below - for the next two or three years.”
Following on from the above: “It has become clear from the clarification that Mr Fisher did not suggest he believed inflation would be above target in the medium term. As a result, we revert to our previous view on Mr Fisher and do not view him as a likely candidate to dissent on further quantitative easing (QE) in November, based on the information available to us so far,” economists at Barclays Research wrote to clients.