The last time that US inflation hit 7.5 per cent, Ronald Reagan was a recently-elected president. And he, older readers might recall, partly owed his election to inflation. He memorably said during his campaign: ‘inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.’
But what of Britain? Bank of England chief economist Huw Pill gave a speech this morning in which he revealed that the Monetary Policy Committee (MPC) very nearly raised the bank’s base rate to 0.75 per cent this month rather than to 0.5 per cent — there was only one vote in it. Should this, along with the news from the US, make us suspect that rates are heading higher than we might previously have thought?
Pill said that the bank now expects wage inflation in 2022 to hit 5 per cent, which, he says, ‘is probably stronger than that consistent with the inflation target over the medium term’.
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