Most of the UK’s inflation is a direct result of Brexit, according to a former heavyweight at the Bank of England.
Former BoE policymaker Adam Posen, said that around 80 per cent of the reason why the IMF expects UK’s inflation to remain high is directly linked to Britain’s departure from the EU.
The economist, who these days chairs the research group Peterson Institute for International Economics, based in Washington D.C., said that “we see a very large gap between the inflation rate in the U.S. and the inflation rate in Europe – the U.K. ends up in between.”
Moreover, Posen is convinced there is “no chance” the UK and US will strike a trade agreement trade deal.
The political wind in Washington is simply blowing the wrong way, he explained, while speaking at a conference hosted by the U.K. in a Changing Europe research group,
“The U.S. Congress … doesn’t want to approve any trade deals of any kind with anybody,” Posen said. “Then you throw in Northern Ireland. This is never going to happen, 100 per cent.”
Brexit and inflation
Bloomberg News reported him as saying that “you’ve seen a huge drop in migrant labour. When you look at the macro factors, it’s very difficult to see anything other than the labour market issues.”
He added: “It really seems like Brexit has to bear a disproportionate role in explaining the inflation.”
Brexit has led to border frictions, jumping transport fees and forced the UK to negotiate its own trade deals outside the EU.
“You run a trade war against yourself, bad things happen,” he said about the situation in Britain. “Better to retreat.”
Posen was in favour of cutting tariffs on food imports in order to ease the cost-of-living crisis for millions of Brits.
He is convinced that reducing similar tariffs as Donald Trump introduced as president would cut inflation about 1.3 per cent, Posen told Bloomberg News.