The Governor said the impact would be to add a quarter of a percentage point to inflation by the end of the year.Last week the Bank surprised the City by raising rates for the first time in a year to 4.75 per cent to try to keep a lid on inflation. But Mr King insisted the move was not a “complete bolt out of the blue”. “Over the next few months, going through the Christmas/turn of the year period, it’s around 50:50,” he added.One of the reasons would be the 150 per cent rise in student fees, pushed through by Mr Brown, which are included in the inflation figures (the maximum tuition fee is rising from £1,175 a year to £3,000). “Overall I would say, looking over the two-year period as a whole, it’s well over 50 per cent, the probability of writing a letter,” he said. Mr King said it was more likely than not he would be writing a letter. The Bank’s latest quarterly Inflation Report showed how soaring gas and electricity prices, coupled with higher university tuition fees, are likely to push inflation up and keep it above the 2 per cent target in the next two years.
Inflation, already at 2.5 per cent, is seen as spiking at 2.7 per cent towards the end of this year but with a high probability it could reach 3.1 per cent, which would trigger a letter to the Chancellor.As part of the Bank’s remit, the Governor must write an explanatory letter if inflation strays more than 1 percentage point above or below the target.
The Bank of England hinted at further increases in interest rates yesterday to combat rising inflation, and the Governor Mervyn King admitted there was a “50:50″ chance he would have to write to Gordon Brown within the next six months explaining why inflation was far above the target. However, he has appointed a new vice-president of compliance and ethics, Rick Cape, to lead a review of safety and compliance issues.”We are staffing up with world-class operational integrity experts who will report directly to me,” Mr Malone said, “and with compliance and ethics staff, whose charge will be to visit facilities and assure me of the safety and integrity of our operations.”. They are cheap and they are playing Russian roulette.”Mr Malone said BP’s problems in the US were isolated, rather than evidence of a wider malaise. And last weekend, BP said it would shut Prudhoe Bay to allow 16 miles of pipelines to be replaced.Charles Hamel, a former oil broker who acted as a go-between for whistleblowers on BP’s staff in Alaska, said: “Prudhoe Bay is an ageing field, BP knows it needs maintenance They deferred the maintenance. The criminal investigation and possible action by regulators was sparked when 200,000 gallons of oil leaked from the corroded pipeline in March, Alaska’s worst-ever on-land spill. It implicitly acknowledges how the string of disasters has tarnished BP’s reputation in the US, and will form part of the company’s defence if politicians and regulators step up their attacks on the company.The FBI is talking to employees and former employees in Alaska who claim BP ignored their warnings about a poor inspection regime for the pipelines at Prudhoe Bay. The plan comes as BP faces questions over how pipelines at its vital Alaskan oilfield, Prudhoe Bay, became so corroded that it has been forced to shut down the whole operation.
It is likely to decide tomorrow if it can keep half the field open.
The crisis follows an explosion at a BP refinery in Texas last year in which 15 employees died, and on charges this year against the company’s US energy trading division, where workers are accused of manipulating the propane market.The decision to launch a safety and ethics review was taken by Bob Malone, who was appointed head of BP in North America at the start of the year. It is setting up an internal task force to make flying visits to the company’s operations and to report back on whether proper safety procedures are being followed. BP is to conduct a wide-scale review of the safety and ethics of its North American operations, to try to head off criticism over its record in the US and prevent any more environmental and safety disasters. The marketing aims to set out the company as offering different services from those of other operators.. O2 will rebrand most of The Link stores under its own banner but will offload some of the outlets.Mr Fuller added that 3 plans to launch a major advertising campaign next month to coincide with its push into the retail sector.