By Max Clarke
The UK’s lasting pattern of above target inflation risks being ingrained in the economy, making it a near permanent feature, the Bank of England have revealed in their latest Quarterly Bulletin.
With consumer and retail price inflation indexes at 4.5 and 5.2% and no immediate end to raised inflation in sight, the figures risk affecting price and wage setting behaviour. Once this happens, inflation will be far more difficult for the Bank of England’s Monetary Policy Committee to address, even when the Committee eventually do decide to raise interest rates from their 0.5% low.
As yet there is little evidence that inflation has affected economic behaviour, as inflation expectations remain volatile. However, uncertainty surrounding the economic indicators used to assess inflation means that forecasting remains uncertain and that the area remains a concern for the Committee.
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