Sir Alan Budd

Former chief economic adviser to the Treasury and founding member of the Bank’s MPC

HOLD

I believe that interest rate cuts will be justified later this year but, for the moment, it is important for the MPC to confirm that it will not allow the current increase in inflation to become embedded. Some slowdown in economic growth may be necessary to ensure that inflation returns to its target in two to three years, but the MPC can move later to reduce the risk that the slowdown is excessive.

Claudio Costamagna

Former vice-chairman of Goldman Sachs investment banking in Europe

HOLD

Bronwyn Curtis

Chairman, Society of Business Economists

HOLD

Fears that UK inflation and inflation expectations could get out of hand have intensified over the last month and the money markets are discounting higher rates by year end. The pessimism on rates is overdone unless there is another inflation shock in the pipeline.

There is a chance that CPI inflation will rise to near 4 per cent in the second half of the year but embedding higher inflation expectations through a wage-price spiral is not likely as the economy is slowing sharply. This will reduce the bargaining power of employees even though their incomes are being squeezed. Unless there is unexpected shock, like another big drop in sterling or a further surge in energy and food prices, weaker growth will dampen inflation in 2009.

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