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Executive is required to receive and review regular Treasury<br />
Management monitoring reports.<br />
1. Introduction and background<br />
1.1 This is the second monitoring report for treasury management in<br />
2011/12 and covers the period 1 April to 30 September 2011. During<br />
this period the <strong>Council</strong> complied with its legislative and regulatory<br />
requirements.<br />
1.2 Treasury Management in Local Government is governed by the CIPFA<br />
“Code of Practice on Treasury Management in the Public Services” and<br />
in this context is the management of the <strong>Council</strong>’s cash flows, its<br />
banking and its capital market transactions, the effective control of the<br />
risks associated with those activities and the pursuit of optimum<br />
performance consistent with those risks. This <strong>Council</strong> has adopted the<br />
Code and complies with its requirements.<br />
1.3 The <strong>Council</strong>’s Treasury Strategy, including the Annual Investment<br />
Strategy was approved by Policy & Resources Committee on 24 March<br />
2011 and this incorporated the Prudential Indicators which had been<br />
approved by <strong>Council</strong> at its meeting on 1 March 2011.<br />
1.4 The two key budgets related to the <strong>Council</strong>’s Treasury Management<br />
activities are the amount of interest earned on investments £247k<br />
(£215k General Fund, £32k Housing Revenue Account) and the amount<br />
of interest paid on borrowing £770k.<br />
2. The Report<br />
Interest Rates and Market Conditions<br />
2.1 The Bank of England is continuing to maintain interest rates at 0.5% (the<br />
bank rate). Due to the economic situation forecasters are not expecting<br />
a rise until at least the third quarter of 2012 (this time next year).<br />
2.2 Consumer Price Inflation (CPI) started the financial year in April at 4.5%,<br />
it dropped back marginally to 4.2% in June and has risen again back to<br />
4.5% in August. Forecasters are predicting the CPI to continue rising to<br />
5%, but are then expecting that it will drop back fairly quickly next year.<br />
The Retail Price Index (RPI) was at 5.2% in April and as with the CPI<br />
dropped back marginally in June to 5.0%, it has however risen back to<br />
5.2% in August.<br />
2.4 The conditions with the economy and the decisions by the Bank of<br />
England not to increase the bank rate are making forecasting difficult for<br />
when interest rates will start to rise.<br />
2.5 Table 1 shows that since the start of the year there has been little<br />
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