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MPC Pins Difference in UK/EZ Inflation on Energy Price-Setting

BOE

Q: Why is UK inflation so much higher than Eurozone/US and has been stubborn?

  • A: Rather mechanical point - particularly point about energy prices in this country. Go back a year before the arrangements were changed. Ofgem price settings used to be changed only every 6 months. So that gives us a larger base effects than other countries.
  • Broadbent: That is the vast difference with Europe. Core inflation in March we were 6.2% vs 5.7% in Eurozone. If you look at energy in March is 40% higher in the UK, whereas in Europe its negative. So it will come down in the UK, quite quickly and quite predictably. That is the bulk of the difference.

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