Bank MP expects UK inflation to ‘comfortably’ exceed 5% by spring

Labyrinthine Covid Reminder System Is The Real Reason For The Delays

Bank of England chief monetary policy officer says inflation is set to rise ‘comfortably’ above 5% next spring when energy regulator Ofgem raises price cap affecting millions of households .

Record levels of job vacancies are also expected to persist longer than expected as the job market adjusts to changes in the economy brought on by the pandemic, said Ben Broadbent, central bank vice-governor for monetary policy. .

The uncertainty surrounding the impact of rising wage demands from workers seeking to hedge against declining living standards means he continues to watch for signs of a wage / price spiral.

“If wage earners’ expectations of future inflation rise in response, or if they demand compensation for increases in the cost of living that have already occurred, wages could also accelerate further, even without further fall in unemployment,” Broadbent said.

Speaking to Leeds University Business School, he said inflation was set to rise until at least April next year when the price cap is expected to be raised. “The headline inflation rate is expected to rise further over the next few months and is likely to comfortably exceed 5% when Ofgem’s cap on retail energy prices is adjusted the next,” a- he declared.

He said the recent surge in inflation in goods, especially cars, driven in part by a squeeze in the global supply chain, was likely to fade and, in some cases, reverse, before a rise in bank rates has an impact.

He said: “I still think it’s more likely than not – looking in a few years as we should – that these pressures on the prices of traded goods are more likely to ease than to intensify. “

In the only reference to the newly identified coronavirus variant in his speech, Broadbent added, “Obviously, Omicron’s new variant could interrupt this process, depending on the effectiveness of existing vaccines against it and the severity. of its effects on health. The ones we don’t know yet.

Broadbent was one of seven members of the Bank’s Monetary Policy Committee (MPC) to challenge financial markets by voting to hold interest rates last month.

Signals from Governor Andrew Bailey and MPC members Michael Saunders and Sir Dave Ramsden convinced investors the central bank was about to tighten its policy.

Ahead of a December 16 meeting, investors are banking on a less than 50% chance that the Bank of England will raise rates from 0.1% to 0.25%, mainly due to the emergence of the Omicron variant and uncertainty about how long energy prices will remain high. .

Last week, Saunders hinted that he would vote to keep the base rate at 0.1%, when he said: “There might be particular advantages to waiting to see more evidence on its possible effects on public health results and therefore on the economy. “

Brian Hilliard, Societe Generale economist, said: “If even the most hawkish MPC member signals that it might be worthwhile to wait and see how serious Omicron’s emergence turns out to be, we should expect other members to have similar concerns.


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