Inflation May Hit 5%, Chief Economist Bank of England
There Has Been an Increase in Food Products Due to Rising Costs for Raw Materials, Management of The Supply Chain, And High Energy Prices
The newly appointed chief economist of the Bank of England has issued a public warning that the inflation rate is likely to surpass 5% by the first quarter of next year. Huw Pill has recently given a statement to the Financial Times that the Bank of England would likely undergo live decision-making during their next meeting for interest rate-setting, which is scheduled to be conducted on November 4.
The statement follows the recently made comments from the governor of Bank of England Andrew Bailey, who stated that it ‘will have to act’ on the country’s rate of inflation. The interest rate of the United Kingdom has been at the historically low rate of 0.1% since the coronavirus pandemic in March 2020.
Inflation in the United Kingdom
According to the recent data that has been collected, the growth rate of inflation has slowed down to 3.1% in the year till September. However, it is being expected to rise because there is going to be an increase in the energy costs, along with higher wages, to try and fill the record number for vacancies and disruption in the supply chain of the overall country further.
Huw Pill, who had been able to succeed as the new chief economist at the Bank of England after Andy Haldane was no longer at his position in the previous month, stated that he would not be surprised to observe the inflation if it reaches 5% or further in the upcoming few months.
During his statement for the Financial Times, he further added that this is a very uncomfortable place for the Bank of England, with the target for inflation being at 2%.
Although, Huw Pill had declined to provide his insight regarding the vote that will be held during the interest rate-setting meeting of the Bank of England when the Monetary Policy Committee would come together in the early days of next month. He said that it is very exceptionally balanced and that November is live.
On a separate note, a survey had been conducted in which it has been found that a high proportion of consumers expect inflation to keep rising over the next 12 upcoming months.
The market research group, GfK, stated that about 48% of individuals out of those who had taken part in the survey conducted in October believes that the country’s inflation will rise, compared with 34% of the sample population in September.
A client strategy director working at GfK, Joe Staton, said that an increased number of shoppers expect that the costs for products and services will dramatically jump in the upcoming 12 months. This sudden rise in inflation would significantly impact the ability of the consumers to shop and save, along with their willingness to spend, during the times when their incomes would be outpaced by inflation.
Major cost increase
The chief executive of New States 2020, Tony Brown, the owner of Beales department stores, stated that the retailers are facing some higher costs for products, which I then being passed onto the consumers. He stated that the cost required to ship a container full of goods into the United Kingdom had inclined from around $2,000, which was a year ago, to $18,000. The wholesalers are also passing down the increased costs onto the major department stores.
He further added that the cost prices of products that have risen by inflation are being passed on from the making firms to consumers, as the department stores cannot absorb such inflated rates. They are further passing on the increased rates only a proportion, while they take the hit on for the rest of the amount, which dilutes some margins.
This is a tough time for the retail market out there due to the increased inflation, and he thinks that what they require more than anything is some amount of calmness in the supply chain management.
Some of the largest producers of food items have given their statements saying that they have also increased the prices of items to cope up with the rising costs of raw materials, which has come due to inflation, along with the higher prices of energy and difficulties in supply chain management.