Britain stuck squarely in stagflation - CPI reaction
|He said: “This morning’s inflation numbers make for very grim reading. Consumer prices are now growing at their fastest rate since January last year, and at almost double the pace targeted by the Bank of England. While rising household energy bills are partly at play, we also lay the blame on labour cost pressures emanating from April’s hike to the minimum wage and business tax rates, which are forcing employers to raise prices to cover the increase in cost.
“Dare we say it, but Britain is now stuck squarely in stagflation. The economy is contracting, jobs are being shed at a breakneck pace and, all the while, inflation is rising without any signs of having yet peaked. This presents a major quandary for the Bank of England. Does the MPC cut rates now in the hope that inflation eases later in the year? Or does it hold off for fear of further stoking price pressures? We still think that an August cut is on the cards, but today’s data means further rate reductions beyond then will likely be very gradual.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.