Is inflation spike a blip – or could consumers be facing a ‘nasty surprise’?

is inflation spike a blip or could consumers be facing a nasty surprise

Sumary of Is inflation spike a blip – or could consumers be facing a ‘nasty surprise’?:

  • Not only does this put it at the highest level in nearly a decade, the month-on-month change from July to August is the biggest increase since the CPI was introduced as a measure of prices in 1997. This is, in other words, big stuff.
  • The question is hardly trivial, given an inflationary spiral, where prices rise ever higher, is one of the great fears of all economists.
  • On the one hand, a lot of the upward pressure in prices at the moment is as much a function of what was happening last year than what’s happening now.
  • One year on, restaurant prices are no longer discounted, so there is what economists call a “base effect” pushing up the inflation index.
  • Indeed, that is likely to be the broad message we get in the coming weeks from the Bank of England Governor Andrew Bailey, who is now duty-bound to provide a letter of explanation as to why CPI is now more than a percentage point above the monetary policy committee’s 2% target.
  • He has consistently argued that many of the effects pushing up prices are temporary, and that while inflation will rise further, it will abate next year.
  • Not long ago it was projecting that prices would not rise beyond 3% this year.
  • And when you look across that “shopping basket” of different categories of goods and services, you see a lot of evidence of rising prices.

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