The threat of inflation is very real for chief economist at the Bank of England Andy Haldane, who this morning said the UK could “overshoot” its inflation target for longer than planned.
Speaking on LBC this morning Haldane said there are “punchy pressures on prices” across the UK economy.
A combination of high prices on goods such as petrol, diesel, timber and cement, combined with higher workers’ wages – which he said could be needed to help people off the furlough scheme – would mean “inflation on the high street isn’t far behind”.
The UK has a two per cent inflation target, but the chief economist, who will shortly depart from the Bank of England, said “we might overshoot that number for a bit longer than we currently plan.”
Higher inflation “would not be good news” for the cost of living, doing business in the UK, or the government, as the cost of borrowing would go up, Haldane added.
Inflation – and whether it is about to soar – has been a central theme that has dominated conversations among economists, analysts and bankers over the past few months.
The Bank of England forecast in February that inflation would reach 1.9 per cent by the end of the year, but many economists expect it will exceed its two per cent target before then.
Annual CPI increased from 0.7 per cent to 1.5 per cent in April, creating fears among some that inflation could be a future problem as the UK economy recovers.
Elsewhere, Haldane was complementary of Chancellor Rishi Sunak, describing him as having “played a blinder” when it came to emergency policy during the Covid-19 pandemic.