PRESS DIGEST - Financial Times - May 20

Financial Times

DOUBTS CAST ON BANK'S INFLATION CREDENTIALS

There is a suggestion of doubts about the credibility of the Bank of England's monetary framework as Britain enters into its most inflationary period for over a decade. In recent months a widening gap between the yields on index-linked government bonds and on conventional gilts indicates that bond-market investors are willing to pay much higher prices for inflation protection. Paul Dales of Capital Economics said the gap could be the 'first sign that the markets are starting to lose faith in the ability of the UK's policymakers to deliver a low and stable inflation environment'. Together with surveys showing rising household inflation expectations and intentions by corporations to increase prices, economists say that there is a greater risk of higher inflation returning to normal British life.

UNIONS RAISE THREAT OF STRIKES OVER PAY OFFERS