New Bank of England (BoE) figures released today revealed an increased flow of money in the UK in May, fuelling inflation fears and confirming pessimistic predictions by the bank's governor, Mervyn King.
Today's figures show that broad money – cash outside institutions like banks, building societies and private sector retail banks – rose in quantity by £8.5 billion after seasonal adjustments, while mortgage lending of broad money was also up by 0.9 per cent, equalling £16.1 billion.
Although 12-month growth rates fell on average and the broad money flow increase was below the £14.2 billion average for the previous six months, observers believe today's figures showing continued growth in the overall amount of cash in Britain are ominous for inflation.
Fears exist that Britain's already struggling retail sector, which is reporting sustained price cuts in an effort to keep consumers spending on the high street, could combine with rising amounts of money flooding into the UK to place sterling under heightened inflationary pressure.
The bank also published its statistics for May's capital issues, which were up £4.1 billion to £46.7 billion, further boosting the flow of money in the economy.
Today's statistics are likely to cement the next interest rate move by the monetary policy committee (MPC) as upwards, fuelled further by the current "mini-boom" in the housing market.
Inflation currently stands at a 2.2 per cent rate, recently raised 0.2 per cent above the bank's preferred 2.0 per cent rate.