“The jump in inflation in May is another warning of the dangers of pumping even more money into an economy that is already growing strongly. The Bank of England should end its asset purchases now, while the Chancellor must continue to resist calls for more government spending and borrowing.
“The year-on-year increase of 2.1 per cent in the CPI was larger than most had expected, including the Bank of England, and sets inflation on course for at least 3 per cent later in the year. A small and temporary overshoot of the official target of 2 per cent would be acceptable, and perhaps even desirable. However, inflation has a habit of sticking around and hits the poorest in society the hardest.
“Some of the price pressures are transitory, but even these are stronger than anticipated — and they are not being offset by lower inflation elsewhere. This is a classic example of too much money chasing too few goods, and services.”
Notes to Editors
For media enquiries please contact Annabel Denham, Director of Communications, 07540 770 774
IEA spokespeople are available for interview and further comment.
Further IEA reading:
Inflation: The next threat? by Dr Juan Castaneda and Professor Tim Congdon
Modern Monetary Theory: Why it can’t provide sustained economic growth and low inflation by Dr Juan Castaneda