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Huw Pill on inflation

BOE
  • "Much of the recent rise in UK inflation stems from developments imported goods prices that reflect these dynamics, as well as rises in international commodity prices. As the pandemic recedes and the level and composition of global demand and supply normalise, these inflationary pressures should subside. But the magnitude and duration of the transient inflation spike is proving greater than expected."
  • "Over recent months inflation has surprised to the upside, UK activity data have disappointed somewhat, while the labour market has tightened. This combination has all the hallmarks of an adverse supply shock, centred on mismatches in the labour market. Supply problems within the UK owe to the 'pingdemic' and shortages of specific skills (such as HGV drivers). Moreover, the rise in wholesale gas prices threatens to raise retail energy costs next year, sustaining CPI inflation rates above 4% into 2022 Q2."
  • "Reality will lie somewhere between these two polar characterisations of the risks. In considering policy decisions, it will be necessary judge the balance of risk between the two scenarios. In my view, that balance of risks is currently shifting towards great concerns about the inflation outlook, as the current strength of inflation looks set to prove more long lasting than originally anticipated."
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