UK inflation could reach 7.5% as energy prices rise

Catherine Mann, a member of the Bank of England’s Monetary Policy Committee (BoE, on Tuesday), said annual inflation in the UK is expected to reach 7.25% in April of this year, under pressure from energy prices. Happened by the Federal Reserve (Federal Reserve Bank, US central bank) in Cleveland.

For Michael Saunders, who is also a member of the committee, the impact of energy prices on inflation is likely to be temporary. This will raise inflation — and slow real wage growth — for a while. But unless energy prices continue to rise or inflation expectations are shaken, it is unlikely that it will generate sustainable hyperinflation.”

Thus, according to him, it does not make sense to tighten monetary policy too much, with the aim of returning to the inflation target of 2% per year, while the temporary impact of energy prices is at its peak.

“This does not mean that the MPC has abandoned its commitment to low inflation, but there is little that monetary policy can do with the temporary effects of inflation,” he said. “The big picture is that while high energy prices are responsible for much of the excess inflation, it is also true that the economy is experiencing a significant increase in demand and inflation expectations are not as consistent as they would like,” he added.

Saunders said that at the February meeting he was in favor of a 0.5 point rate hike. But he noted that this position does not necessarily mean that he would vote in 0.5 point steps if interest rates were to rise further.

According to him, the committee has tools to bring inflation back to the 2% target.