The Governor of The Bank of England has written his “Dear George” letter to our Chancellor – George Osborne. If you want to see the copy just click here. He hints that inflation is likely to continue to rise within the 4%-5% range before falling back in 2012. He asserts that the rate of inflation is above the Bank’s target and sites various causes – commodity prices and taxation increases being two significant factors. The general sentiment is that the Bank is being careful, aware that raising interest rates can be detrimental to recovery, but are a necessary tool to control inflation. Cautious is probably the best way to describe Mr King’s approach and frankly this does seem very wise indeed.

City analysts have mixed views, but it would seem a fair representation to suggest that May is more likely to be the month when rates are increased, albeit marginally. This gives further time for accurate data to come through enabling more informed decisions to be reached.

This in mind, there is a great little video from M&G  that is worth a look at. Ben Lord one of the managers of the M&G UK Inflation Linked Corporate Bond Fund gives a very quick and straight-forward summary of the concerns that inflation poses. M&G have permitted me to make this link available, it is generally only for professional advisers, but there is nothing terribly contentious or complex within the video.  They are happy for your to view this. Thank you M&G.

I have also put the link to the Bank of England’s press conference today here so that you can also hear this from the horses mouth so-to-speak. Its a fairly lengthy briefing – but you may find it of interest. If you would rather just read the briefing summary click here.

Here is a BBC interview with the Chancellor.

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