The growing need for a policy response to the ‘new inflation’

There’s been much debate on these pages about the political implications of higher inflation. Ironically, this morning’s news of record food prices could relieve the pressure on the Bank of England Governor. His argument for caution when it comes to a rate rise is based on the claim that UK inflation is now being driven by events beyond the MPC’s control. Today’s figures reinforce that case, showing that global commodity prices remain a key driver of the rising cost of living in Britain’s households.

The same argument doesn’t really work for the Chancellor, whose remit isn’t just to keep headline inflation down, but also to help households cope with the kind of inflation we’re now seeing – whatever its cause. In fact, the changing ‘shape’ of inflation, and the shift in weighting towards food and fuel, makes life even more difficult for anyone trying to develop a political or policy response.