Inflation in the UK could rise above 5% by early next year, according to the Bank of England’s new chief economist.
Huw Pill, who replaced Andy Haldane in September, said that the Bank of England’s monetary policy committee was “finely balanced” over whether to raise interest rates at its next meeting on 4 November and that it would be a “live” decision.
Earlier this week, consumer price inflation fell back slightly to 3.1% despite pressure on households from soaring petrol prices and businesses being hit by shortages of lorry drivers and materials.
However, the Bank of England had previously said it expected inflation to exceed 4% by the end of the year.
Inflation has been on the rise this year, with businesses recovering from the coronavirus pandemic, energy prices soaring, the cost of petrol hitting an eight-year high and disruptions in the global supply chain continuing to have a knock-on effect on costs.
“I would not be shocked, let’s put it that way, if we see an inflation print close to or above 5% [in the months ahead],” Pill told the Financial Times. “And that’s a very uncomfortable place for a central bank with an inflation target of 2% to be.”