Stocks in London ended mixed last week after the Bank of England downplayed the threat of a sustained rise in inflation, following a hawkish pivot from the US Federal Reserve. Markets throughout Europe and the US recently enjoyed one of the more memorable days in a week that was largely dominated by indecision and uncertainty. The Bank of England was one of the main determinants of that positive outlook, with the MPC allaying fears that the recent hawkish shift from the Fed is the first in a wave of many such moves. While last week’s meeting saw upgrades to growth and inflation projections, there is a feeling that this recent surge in CPI will be temporary in nature. Despite UK inflation rising above the 2% target, it seems the Bank of England members remain steadfast in their position that policy should remain accommodative for now. That dovish stance helped to boost the FTSE 100 in two ways, with the prospect of loose monetary policy lifting stocks and driving the pound lower. The UK central bank kept the Bank Rate at its historic low of 0.1% and maintained its Monetary Policy Committee voted eight to one to maintain asset purchases at the current level of GBP895 billion. Outgoing Andy Haldane was, once again, the sole dissenter in his final meeting as a member of the MPC. Most MPC members felt they should “lean strongly against downside risks to the outlook and ensure that the recovery was not undermined by a premature tightening in monetary conditions”, the BoE said. In addition, the BoE insisted that soaring inflation should be only temporary despite a bigger than expected leap in the cost of living as the UK’s economic recovery gathers speed. The central bank said it now expects UK growth to surge by 5.5% in the second quarter as it recovers from a lockdown-hit start to the year. In addition, the BoE warned near-term pressure on prices could “prove somewhat larger than expected”, forecasting that inflation will rise above 3.0% for a temporary period. However, the BoE was unconcerned that consumer price inflation breached its 2.0% target, insisting the spike is set to be only “transitory”. UK consumer prices jumped in May to 2.1%, official figures last Wednesday showed, with inflation exceeding the BoE’s target for the first time in nearly two years. Commentators believe The Bank of England’s latest message is a cautiously upbeat one, though it’s clear that policymakers are essentially in a holding pattern for the time being. The central bank is caught between higher-than-expected inflation and encouraging activity data, and mounting uncertainty surrounding Covid-19.

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