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		</div><p><a href="http://londonglossy.com/wp-content/uploads/2011/02/bank-report-puts-focus-on-economy.jpg"><img class="alignnone size-full" title="Mervyn King admitted to the Chancellor that there were 'real differences of view' among the Monetary Policy Committee" src="http://londonglossy.com/wp-content/uploads/2011/02/min-bank-report-puts-focus-on-economy.jpg" alt="Mervyn King admitted to the Chancellor that there were 'real differences of view' among the Monetary Policy Committee"/></a></p>
<p>The outlook for Britain&#8217;s ailing economy and the future path of interest rates will be in sharp focus when the Bank of England publishes its latest quarterly report.</p>
<p>The City will be looking for a clearer insight into when policymakers might lift rates from historic lows of 0.5%, while the strength of the recovery will also be under the spotlight after the shock contraction at the end of 2010.</p>
<p>The report follows UK inflation figures which revealed a rise to 4% in January &#8211; with Bank governor Mervyn King admitting in a letter to the Chancellor that there were &#8220;real differences of view&#8221; among the Monetary Policy Committee (MPC).</p>
<p>Since the Bank&#8217;s last report in November, official figures revealed the UK economy unexpectedly shrank by 0.5% in the final quarter of 2010 and inflation has continued to soar above target.</p>
<p>The consistently high inflation &#8211; now twice the Government&#8217;s 2% target &#8211; has increased pressure on the Bank of England to consider an interest rate hike. But the shock growth figures dampened this prospect and highlighted the fragility of the economy.</p>
<p>There are fears the UK is teetering on the brink of so-called stagflation, when sluggish growth and high unemployment combine with soaring prices.</p>
<p>In a speech last month, the Governor said the UK was facing the biggest squeeze on living standards since the 1920s as inflation moves towards 5% in coming months and wage growth slows down.</p>
<p>Philip Shaw, economist at brokers Investec, said: &#8220;The Bank of England quarterly inflation report will give us a better idea of the way that members view inflation risks and therefore should shed some light on interest rate prospects.&#8221;</p>
<p>On Tuesday the Governor confirmed expectations for inflation to pick up to between 4% and 5% over the months ahead. Nevertheless last week policymakers voted in favour of holding rates and keeping quantitative easing at its current level of £200 billion.</p>
<p>Bank policymakers have insisted the stubbornly-high cost of living is due to temporary price shocks, such as soaring global commodity prices and the VAT rise last month, and that inflation will drop back in 2012.</p>
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