Today’s news was not all bad. The consumer price measure of food price inflation did at least fall While this still means that food prices are rising, just at a slower rate, the tide here has turned 🖊️ julianHjessop via ipaperviews
But there was also a sharp pick up in services inflation as a whole, from 6.9 per cent to 7.4 per cent. This will encourage fears that labour shortages are fuelling a “wage-price spiral”, where businesses pass on higher labour costs to their customers who in turn demand higher wages from their own employers. Indeed,in the national minimum wage in April will have had a particularly large impact on costs in the hospitality sector.
This will heap pressure on the Bank of England’s monetary policy committee. So far, their only answer to inflation shocks has been to keep raising interest rates, so more increasesBefore today’s nasty surprise, there were hopes that the MPC could get away with a “dovish hike”. This would have combined another quarter point rise, taking rates to 4.75 per cent, with a clear signal that the peak is likely to be much lower than the 6 per cent that some were expecting.
This in turn would have eased the pressure on mortgage rates, which is crucial given that the UK has a relatively high proportion of short-dated mortgages that need to be refinanced soon.paying the price for the past mistakes by the BankA more confident – and credible – central bank might be able to pause to assess the full impact of the interest rate hikes that have already happened and to look forwards, rather than backwards. The US Fed has recently done just that.
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