The Bank of England has revised its inflation predictions, now saying the UK will have 11 percent inflation rates by the fall.
Huw Pill, the chief economist for the Bank of England said they had underestimated the rate of inflation, after it was announced the rate prediction had been increased by the Monetary Policy Committee. The new estimate says inflation will rise to at least 11 percent by October. The bank had previously estimated it would be ten percent. The inflation target is typically 2%.
Pill said, “In the sense of the outcome of our forecasts, yes we have underestimated inflation.”
The admission is just the latest by experts saying they had underestimated the extent of inflationary pressures and how high the rate would rise. The European Central Bank, head of the Bank of England Andrew Bailey, and Treasury Secretary Janet Yellen had all predicted the higher inflation of late would be temporary.
Right now the CPI in Britain is around 9%, which is the highest it has been in nearly 40 years. However in the fall, the national energy regulator is scheduled to raise the energy price cap, which will increase energy prices, and that will raise the inflation rate even higher.
The Bank of England blames the rising rate on the cost of energy, as well as “the tight labour market and the pricing strategies of firms.”
While many are blaming Russian President Vladimir Putin for the world economic crisis, the UK Parliament was told in testimony that a large factor was the decision by Western governments to lockdown their populations.
University of Nottingham Professor of economics, David Paton said “eye-watering sums of money” used for “paying healthy people not to work” created the “inevitable economic consequences we are now seeing”.
He went on, “Many of our current problems could have been avoided had the government carried out an effective cost-benefit analysis of lockdowns and other restrictions.”
The Bank of England also announced there would be another hike on interest rates to 1.25%. City of London investors are said to be pricing in an interest rate of 3.1% by the end of the year, the highest since the 2008 crisis.
Meanwhile the Tory government has indicated that there will be no tax cuts forthcoming to help allay any of the misery,
Chancellor Rishi Sunak said, “I have a responsibility to make sure that we don’t burden our children with a legacy of debt that I didn’t deal with. And that’s why I’ve had to take some decisions which I know are not always popular. They’re difficult but I firmly believe they are the right and responsible decisions for the long-term benefit of our country and our children’s future.”
