BoE's King on the UK economy
"The direct impact ... will be seen in CPI inflation over the coming months -- making it less likely that I will have to write an explanatory letter to the Chancellor than was the case two months ago," King told a business audience in Winchester.
He also said there was "great uncertainty" about the inflation impact of supply pressures in the economy, partly due to a growing labour force.
"Given the uncertainties about the supply potential of the economy, we will need to keep our eye on the ball and monitor closely the evolution of wage and cost pressures," King said.
"It is still not clear that earnings have been sufficiently restrained to accommodate the past rises in energy prices and the fall over the past year in the price of our exports relative to our imports without a squeeze on profits."
King said interpreting economic signals was no easier for him as an established MPC member than it was for the newer members.
Speech by Mervyn King, Governor of the Bank of England at the Great Hall in Winchester, Tuesday 10 October 2006.
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