IEA Economics Fellow Julian Jessop has been quoted in The Independent reacting to new that inflation remained high at 8.7 per cent in May and criticising the Bank of England for not tightening monetary policy sooner.

Julian said:

“The latest inflation shock will heap pressure on the Bank of England to raise interest rates even further, increasing the risk of overkill.

“Headline inflation should still drop sharply over the rest of the year as food and energy prices fall back. But the problem now is that core inflation, excluding food and energy, is no longer just ‘sticky’. Instead, it is actually heading in the wrong direction.

“To some extent, this is driven by temporary factors like the extra Bank Holiday and the large increase in the national minimum wage. The bigger picture, however, is that the UK is still paying for the Bank’s underestimation of inflation and decision to keep monetary policy too loose for far too long.”

“The government should avoid kneejerk and counterproductive policies like mortgage subsidies or price controls. But they have a role in tax and regulatory reform, including fixing our broken planning system, to ease constraints on the supply side and to boost the economy’s productive potential.”

Read the full article here.