Inflation expected to rise ‘slightly over 4%’ in the final quarter of this year, as energy and goods prices surge
- Latest: Bank predicts CPI inflation will rise over 4%
- MPC leaves rates on hold, but two policymakers want to end QE early
- Bank says case for modest tightening has strengthened
- Pound jumps as traders predict rate rise in March 2022
- No need to panic buy, says minister
- Citizens Advice: perfect storm for poorer households
- Stagflation fears as UK private sector growth slows
- Fears of disruption this Christmas from lorry driver shortage
How soon could the first UK interest rate rise since the pandemic began come?
Ruth Gregory of Capital Economics says a rate rise in 2022 now seems the most likely outcome, with February or May both plausible (the BoE will publish a new Inflation report, with updated forecasts, at both those meetings):
A rate hike in November 2021 looks too soon, given that all members agreed that the outlook for the labour market was particularly uncertain and that there was a “high option value in waiting for additional information” about the impact on unemployment once the furlough scheme ends in late-September. That suggests most MPC members are willing to sit tight for a few months.
In our view, a rate hike in February/May 2022 seems plausible given that, according to our forecasts, this is when inflation is likely to be at its highest, and when the upside risk to inflation expectations may be at their greatest.
It is Central Banking 101 not to raise rates in the face of commodity price pressures pushing up inflation as it is unnecessarily costly in terms of unemployment and growth.
Nonetheless, the MPC seem on track to raise rates to 50bps next year and start allowing bonds on the balance sheet to mature. Fiscal policy is about to tighten sharply in the UK with the ending of the furlough scheme and prospective tax hikes – the risk of lacklustre growth setting in before the economy has recouped its Covid losses should be of greater concern than a temporary spike in inflation.”
BP’s decision to close some of its petrol stations because of a shortage of lorry drivers shows that the supply chain crisis is getting worse rapidly, warns Jim McMahon MP, Labour’s Shadow Transport Secretary.
McMahon says:
“This is a rapidly worsening crisis that the Government has failed to heed the warnings of for a decade, never investing in or valuing working class jobs.
“Sticking plaster solutions are not going to solve it. Ministers must take decisive steps now to tackle the 90,000 driver shortfall.
Related: BP rations petrol and diesel deliveries to its service stations