Bailey pours cold water on hopes of inflation falling quickly

Should we bother taking any notice of what Andrew Bailey says about inflation, given that he and his colleagues on the Monetary Policy Committee (MPC) failed miserably to foresee any of the inflationary forces of the past two years? As late as May 2021 they were still predicting that the Consumer Prices Index (CPI) would rise no higher than 2.5 per cent at the end of 2021 before falling back to 2 per cent.

For what it is worth, the Governor of the Bank of England has come over all pessimistic. Addressing the Treasury Select Committee this morning he said markets have got it wrong: they are putting too much emphasis on last week’s fall in CPI from 6.7 per cent to 4.6 per cent and are failing to realise that inflation will be around for longer than they think. ‘We are concerned about the potential persistence of inflation as we go through the remainder of the journey down to 2 per cent and I think the market is underestimating that,’ he said.