Rising oil costs 'may prevent inflation slowdown'

21 March 2012

Britain's level of inflation may not slow as quickly in 2012 as was expected due to the fact unrest in the Middle East is driving up the cost of oil.

That is the opinion of Spencer Dale, chief economist at the Bank of England (BoE), who believes the rising price of this vital commodity could mean the central institution has to re-evaluate its inflation estimates for this year.

During a speech delivered in Aberystwyth, Mr Dale explained that the Monetary Policy Committee (MPC) feels the figure is "somewhat more likely to be below" the two per cent target over the next three years.

However, he went on to say that while there are several reasons to expect the growth in living costs to decelerate, the overall outlook should now be "more balanced" due to various issues.

"External price pressures might continue to push up on domestic costs and prices," he noted.

By Asim Shah

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