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UPDATE 1-Bank of England's Forbes: inflation could overshoot target "sharply"
October 14, 2016 / 2:04 PM / a year ago

UPDATE 1-Bank of England's Forbes: inflation could overshoot target "sharply"

(Adds comments, background)

WARSAW, Oct 14 (Reuters) - Bank of England policymaker Kristin Forbes said inflation in Britain could “sharply” overshoot the BoE’s 2 percent target, partly due to measures announced by the central bank in August to offset the impact of the Brexit vote.

“All in all, partly due to this package, partly due to the underlying momentum in the economy, partly due to other changes in the economy, it does look like the days of inflation bouncing around zero are long gone,” Forbes said.

“Inflation is already picking up. It will pick up even faster and we are likely to overshoot our 2 percent inflation target perhaps sharply in the next two years,” she told a conference organised by Poland’s central bank.

Forbes, a former adviser to the U.S. White House during the presidency of George W. Bush, backed the BoE’s decision to cut interest rates to a new historic low of 0.25 percent in August but was in a minority voting against the expansion of its bond-buying programme.

The BoE signalled in September that it might cut rates again on Nov. 3 if the outlook for the economy remained largely in line with its assessment in August.

But since then, data has shown the economy withstood the initial shock of the Brexit vote better than first thought and Britain’s sterling currency has fallen further, adding to inflation pressure.

Forbes said the degree to which the fall in sterling is passed through to prices would be critical for determining inflation. (Reporting by Marcin Geottig in Warsaw, writing by William Schomberg in London Editing by Jeremy Gaunt)

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