BoE's Fisher says inflation to stay at 2.5% until 2015

Bank of England policymaker, Paul Fisher, a member of the Monetary Policy Committee (MPC) warned this week that he expects inflation to stay at around 2.5 per cent until 2015.

Speaking to The Sun newspaper, Mr Fisher also said that he expects GDP in the third quarter to be strong and at least wipe out the contraction in the economy in the second quarter that is expected to be confirmed by the Office for National Statistics (ONS) as a contraction of 0.50 per cent this morning.

On Monday, Mr Fisher said in a speech in London that he believes the distressed financial events of the recent past has made unconventional actions from central banks the “new normal” and that financial markets are “adapting and evolving” to the new environment.

Mr Fisher said that the Funding for Lending Scheme (FLS) and the banks’ decision to “do something innovative” was necessary to help the property market because many of the influences hindering it are outside of the UK’s control, pointing to the euro debt crisis.

Mr Fisher said: "The banks now really have an incentive to go out there and lend. We think there are credit-hungry businesses out there. It's difficult to see there are any excuses left."

He noted that five of the six biggest lenders have signed up for the FLS but noted that each bank has a different starting point.

"We cannot expect every bank in the FLS to increase its stock of lending to the real economy over the 18-month drawdown period, the crucial impact will be whether the FLS enables them to lend more than they would have done in its absence," he said.

Mr Fisher reiterated that the scheme was not designed to supply money to specific parts of the economy and that it is up to the banks who they lend to.

He said: “We are relying on the pressures of demand and supply, and competition, to ensure that credit flows to where there is demand. It is not our intention that banks put themselves at risk by making imprudent loans"

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