Are we trapped in an inflationary spiral?

Are we heading for a 1970s-style inflationary spiral? Not according to Catherine Mann, former chief economist at Citigroup, who argues that we are now less exposed to fluctuations in oil prices than we were then. She also makes the case that businesses are more reluctant to put up prices and that the link between inflation and wages is weaker than it was in the years of high inflation when wages often rose three or four times a year and prices in the shops were jacked up more frequently than now. Her opinion matters because she is the latest recruit to the Bank of England’s Monetary Policy Committee, which is charged with setting interest rates to try to keep inflation within set limits.

But is the UK economy really less susceptible to inflationary pressures than it was in the years that followed the 1973 oil crisis? While our dependency on oil and other fossil fuels may have fallen in some respects — renewables have large displaced coal in electricity generation and our homes, cars and factories are all more energy-efficient than they were then — we remain heavily dependent on oil and gas.