Rising energy prices and supply chain disruptions undermine Bank of England’s optimism that inflation will settle
Bank of England governor Andrew Bailey says that the cost factors that have driven UK inflation to its highest level in more than nine years will fade. Traders in the sterling markets are starting to disagree with his optimism.
But there are domestic issues at play that leave Britain particularly vulnerable, with annual inflation running at 3.2% and the central bank forecasting it will climb above 4% before the year is out. In the energy market, tightening gas supplies in global markets are amplified in Britain, which does not have a large storage capacity and is dependent on fuel imports., extending their price gains in the past 12 months to an astonishing 700%.
And a worldwide rise in the cost of foodstuffs — the UN’s global food price index has risen 25% in the past 12 months — has ended a nine-month streak of declines in British food costs, with prices set to rise even higher in the coming months.
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