Inflation to hit 5%, says Bank of England chief economist Huw Pill said in an interview with the FTIt’s Chris Giles.
While the rise in inflation is still expected to be a transitory peak rather than a runaway trend, it also means, according to Pill, that the November meeting of the monetary policy committee, which sets the interest rates, of which Pill is a member, faces a “live” decision to raise or not to raise rates to fight inflation.
One of the most important and overlooked political facts of our time is that the Conservative electoral coalition – from couples in their twenties with a mortgage in the West Midlands, to the wealthy retiree who owns a house in Surrey, to the non- retiree so wealthy in a council house or a house of their own in Hartlepool – is made up, for the most part, of people who haven’t done too badly since the era of ultra-interest rates. low.
One politician who understands this is Rishi Sunak, which is one of the reasons he’s so reluctant to use the leeway that low interest rates have given governments – because the last thing the coalition Conservative election needs is a rate hike.
Now, one should not exaggerate the magnitude of the rise or its immediate impact: we are talking for the moment of a return to pre-Covid interest rates of 0.75%, and a much slower increase of anything like the pre-financial crisis. interest rate. But it is striking that Pill says that monetary policy has now entered a “different phase”: the era when the Bank’s goal was to stimulate growth with ultra-low rates and quantitative easing is now. gone, and that monetary policy will, as a result, become much less – in Pill’s words – “boring,” and the Monetary Policy Committee itself will become more divided.
Of course, a less boring era for monetary policy might well leave Chancellor Sunak and the rest of the government to remember that living in “interesting times” has traditionally been a curse, not a blessing.