Inflation vs. Growth

As the dollar hits record lows against the euro, the Bank of England continues to lean towards the views of its European counterpart, away from the economy-boosting strategy of the Fed.

"Following on from Ben Bernanke's comments in Congress, the markets are taking a very clear view of what is happening. In the US, the Fed is clearly more worried about growth than inflation and will do whatever it takes to see the economy grow, regardless of the short-term effect on inflation and exchange rate," said Jeremy Tigue, manager of the Foreign & Colonial Investment Trust. "The ECB is only worried about inflation and will not cut interest rates unless, and until, it is sure inflation is under control."

Tigue added: "Faced with the prospect of having to write another letter to the Chancellor explaining why inflation is over target, it seems that Mervyn King will take a cautious line in cutting interest rates even if economic growth slows sharply."