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Page last updated at 07:54 GMT, Thursday, 5 August 2010 08:54 UK

Inflation casts shadow over bank rate decision

The Bank of England's Monetary Policy Committee announces its latest decision on interest rates today, with the likelihood that they will be held at 0.5% for the 18th month in a row.

Brian Coulton, head of global economics at Fitch Ratings, told the Today programme that there has been "surprising stickiness" in the rate of inflation, currently at 3.2%, which has not fallen as fast as the bank had expected, given the recession, "and that's something the bank has to worry about" when considering interest rates.

And he added that "within six months there is going to be a clearer need to signal the exit strategy from this super-loose policy" of keeping rates low.

And Charles Goodhart, a former MPC member, told Today presenter Evan Davis that higher commodity prices and a planned rise in the VAT rate "might make the inflation figures over the early winter pretty poor". He added that although there are indications that the inflation rate may fall considerably in 2012, the bank and the government "have got a very, very nasty period in the middle".

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