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Inflation in focus for British investors as fears of a US recession PDF Print E-mail
Monday, 11 February 2008

Agence France-Presse . London

British inflation data is expected to play a key part in dealers thinking next week as they seek to drive higher the London stock market, which has slumped on lingering fears of a US recession.

London s FTSE 100 index of leading shares ended the week at 5,784.00 points, down 4.07 per cent or 245.2 points from the previous Friday. Following the publication of British inflation data for January next Tuesday, the Bank of England will on Wednesday unveil its latest quarterly inflation and economic growth forecasts.

This week, the BoE trimmed its key interest rate by a quarter-point to 5.25 per cent amid concerns of slower economic growth, while keeping a close watch on inflation.

The British central bank said its rate-setting Monetary Policy Committee needed to balance the risk of a sharp slowing in activity against the danger of rising inflation. The main job of the BoE s monetary policy committee is to keep British 12-month inflation close to a government-set target of 2.0 per cent. Inflation was unchanged at an annual rate of 2.1 per cent in December.

As the growth outlook has worsened, so too have inflation prospects, said Capital Economics analyst Vicky Redwood. In particular, CPI (consumer prices index) inflation is now set to rise more sharply in the near-term than the MPC was expecting three months ago. Inflation in Britain is being fuelled largely by big hikes to energy prices. On the corporate front next week, all eyes are expected to be on mining giant Rio Tinto, which unveils full-year earnings on Wednesday.

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