The Bank of England will face a difficult decision at its next monetary policy committee meeting. Although headline inflation is moving in the right direction, the core remains uncomfortably high and is showing less inclination to be driven by tighter monetary policy.

Catherine Mann, commented in a speech yesterday that the Central Bank will need to find other ways to affect underlying inflation and that will make it difficult to decide monetary policy as the year progresses.

With energy prices on a downward slope, headline inflation is continuing to fall, and the between headline and core prices is narrowing. The prices of services and goods remain in an uptrend, which could be an issue going forward.

The mild winter in Europe has seen demand for energy decrease. Although the high cost of energy fed through into almost every area of consumer spending, that pressure is now decreasing.

The 2% target for inflation is set in relation to the headline figure, and this will be extremely difficult to meet given a persistent and unmoving core.

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