FTSE 100 - CLOSE 5586.31 +95.22
The odds on another emergency cash injection from the Bank of England appearing shortened yesterday as inflation dropped to a 30-month low, sending the FTSE 100 up nearly 2 per cent.
Falling petrol prices were the main catalyst as the consumer price index (CPI) rate of inflation eased to 2.8 per cent in May, down from 3 per cent in April. Overall, prices fell fractionally between April and May.
Colin Edwards, economist at the Centre for Economics & Business Research, said the news should be cause for optimism among households, helping incomes go further.
It also provides relief for the Bank of England, bringing inflation more comfortably within its target range of 2 per cent plus or minus a percentage point.
Edwards said: “If inflation continues to come down as it has done so far this year, this widens the scope for the Bank to pursue a process of monetary expansion while maintaining inflation within the target range.”
The governor of the Bank of England hinted last weak that another round of quantitative easing may be on the way, as he seeks to kick-start Britain’s stalled economy.
Minutes of the Bank’s last monetary policy meeting, published today, will give an indication of how other committee members feel on the subject.
The US Federal Reserve is also meeting today to decide whether to extend its own money printing programme. The prospect of concerted monetary stimulus from the world’s central banks gave markets a lift yesterday.
