Sentance warns of inflation spike
Simon Ward
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Few economists are talking about a possible near-term inflation rise – see Tuesday's post – but it is on the Bank of England's radar, judging from a speech this week by MPC hawk Andrew Sentance:
We have seen two major spikes in CPI inflation within the last two years. And it is possible that another one is in prospect when higher VAT comes into effect early next year, particularly if this is accompanied by a continuation of the recent surge in energy and commodity prices. These repeated episodes risk eroding confidence that UK policy-makers remain committed to low and stable inflation, with a knock-on effect on inflation expectations in financial markets, among the business community and the public which could be self-fulfilling.
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