Inflation could peak at 5 per cent in spring, says IEA economist
Annabel Denham writes for The Spectator
Len Shackleton comments for Politics.co.uk
“The jump in UK inflation to 4.2 per cent in October was bigger than most had anticipated, including the Bank of England, and should seal the deal for an interest rate hike in December.
“The increase was led, as expected, by a 22.3 per cent surge in energy prices as the Ofgem cap on domestic fuel bills was lifted. However, the core measure (excluding food and energy) is also well above the Bank’s 2 per cent target, at 3.4 per cent.
“Inflation will continue to rise, due to a combination of unfavourable base effects and strong global cost pressures, probably peaking at around 5 per cent in the spring.
“The root cause of rising inflation is too much cheap money chasing too few goods and services, and it is too late to prevent prices from climbing further in the coming months.
“Market forces and price signals also need to be allowed to work. Any direct government intervention should therefore be limited to protecting the poorest households from a cost of living crisis.
“However, the Bank of England can at least help to ensure that a temporary increase in inflation does not become permanent, by ending its money printing and starting to return interest rates to more normal levels. This would send a clear message that the Monetary Policy Committee is serious about keeping inflation down over the medium term, which is, after all, it’s main job.”
ENDS Notes to editors Contact: Emily Carver, Head of Media, 07715942731 IEA spokespeople are available for interview and further comment.