Inflation likely to hit 5%, warns Bank of England chief economist

The Bank of England's new chief economist has warned that UK inflation is likely to hit or surpass 5% by early next year. Read more: Inflation likely to hit 5%, warns Bank of England chief economist

Inflation likely to hit 5%, warns Bank of England chief economist

The Bank of England’s new chief economist has warned that UK inflation is likely to hit or surpass 5% by early next year.

Huw Pill told the Financial Times that the Bank would have a “live” decision to make at its next interest rate-setting meeting on 4 November.

It follows recent comments from Bank of England governor Andrew Bailey who said it “will have to act” on inflation.

The UK interest rate has been at a historic low of 0.1% since March 2020.

Recent data showed that inflation growth slowed to 3.1% in the year to September. However, it is expected to increase because of rising energy costs, higher wages to fill record vacancy numbers and supply chain disruption.

Mr Pill, who succeeded the Bank of England’s former chief economist Andy Haldane last month, said he would “not be shocked” to see inflation reach 5% or above in the coming months.

He told the Financial Times: “That’s a very uncomfortable place for a central bank with an inflation target of 2% to be.”

While Mr Pill declined to say how he would vote when the Bank’s interest rate-setting Monetary Policy Committee meets early next month – stating “it is finely balanced” – he said: “I think November is live.”

Separately, a survey of consumers found that a high proportion of them expect inflation to rise over the next 12 months.

GfK, the market research group, said that 48% of people it surveyed in October think inflation will accelerate, compared with 34% in September.

Joe Staton, client strategy director at GfK, said: “More and more shoppers expect that costs for goods and services will jump dramatically in the next 12 months.

“This rapid increase will impact our ability to shop and save, and our willingness to spend, at a time when our incomes are outpaced by inflation.”

‘Tough time’

Tony Brown, chief executive of New Start 2020, which owns Beales department stores, told the BBC’s Today programme that retailers were facing higher costs, some of which were being passed on to shoppers.

He said that the cost of a container to ship goods into the UK had risen from about $2,000 (£1,450) a year ago to $18,000.

“The wholesalers are passing those costs onto us,” said Mr Brown.

He said that, for example, the cost price of a vacuum cleaner had risen from £49 last year to £79.

“So that cost price has to be passed on, we can’t absorb it,” Mr Brown said. “We are passing on a proportion of that and having to take a hit on the rest, so it does dilute margins.

“It is a tough time for retail out there and I think what we need more than anything is some sort of calmness in the supply chain.”

Some of the world’s biggest food producers have also said they have been increasing prices of their products to cope with rising raw material costs, as well as higher energy price and supply chain difficulties.

Unilever, which makes PG Tips, Cornetto, Marmite and Dove skin care, said it had lifted prices and expects that to continue into next year.

The Times reported that Unilever said the cost of palm oil, which the company uses in soap and moisturisers, had risen by 82% over two years because of labour shortages in Indonesia.

Poor crop production of soya bean oil in Brazil, which is used in food, has also led to higher prices.

Kraft Heinz, which makes tomato ketchup and baked beans, recently warned that people will have to get used to higher food prices.

And Nestle revealed this week that it too had increased prices, which rose by 2.1% in the third quarter.

The maker of Kit-Kats, Nescafé and Purina pet products said prices had risen on the back of higher energy and raw materials costs, as well as transport.

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Inflation likely to hit 5%, warns Bank of England chief economist

Source : Business Matters More   

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Fears over the future of free debt advice

There is growing concern that free, face-to-face advice which helps hundreds of thousands out of debt each year could be cut. Read more: Fears over the future of free debt advice

Fears over the future of free debt advice

There is growing concern that free, face-to-face advice which helps hundreds of thousands out of debt each year could be cut.

New contracts from the Money and Pensions Service (MaPS), which funds most free debt advice in England, will see more money spent on help given over the phone or online.

Debt advisors says that risks leaving some people behind.

MaPS says the new contracts will provide more help to more people.

Jane, that’s not her real name, got into £2,000 worth of debt a couple of years ago.

She says getting advice in person was crucial in helping her get her finances back in order.

“I found an organisation near me and they were really lovely,” she says.

“I went in, we sat around, there was a team of people that worked in different areas.”

‘Part of a team’

“Someone was contacting the council for me while I was in the room so if there was a question I’d speak to them.

“Somebody else was uploading information so all my income was being put on one sheet and that was being sent to everyone.

“Feeling like you were part of a team rather than being interviewed – it helped actually seeing people face-to-face.”

Jane is dyslexic and describes herself as neurodiverse, which refers to the different ways in which some people think, learn and relate to others.

She told the BBC there is no way people like her could get the same quality of debt advice and help remotely; “If I had to have that debt advice over the phone it wouldn’t have been the same at all.

“When we sat at the table, we laid everything out, and put everything into piles. I can’t see how that would happen over the phone.

“If you’re having a phone conversation and then you’ve got to go on email and then there’s an email… it just adds to the amount of chaos going on at that time.

“To go in there it’s a lot quicker to just organise everything [and] sort everything out.”

The funding restructure by MaPS will mean more money will go to a smaller number of larger regional and national centres, leaving less for local, on the ground, face-to-face support.

Debt advisors say while help over the phone or online can work for some, for others, like Jane, there is no substitute for help and advice given in person.

Amy Taylor, a debt advisor and chair of the Greater Manchester Money Advice Group, told BBC Radio 4’s Money Box programme this change in funding strategy could cut the amount of face-to-face advice by between 50% and 60%.

She said that in one area that covers Grimsby and Hull, which was recently named the debt capital of the UK, there are currently 15 debt advisors.

In March 2022, when this new funding comes into effect, there will be four.

“We will be losing that local connection that people need.

“The shift is towards regional or national contact centres rather than having organisations with front doors open where somebody with their carrier bag full of unopened letters [bills] can walk in and get the debt advice they need.

“So the MaPS is directing the funding towards remote debt advice and that is a different thing to what debt advisors do”.

Debt advisors have now started a campaign group and are due to meet a group of around a dozen MPs on 4 November to talk through their concerns.

Questions are also now being raised in Parliament about the changes:

In a statement MaPS said; “”MaPS’ debt advice recommissioning is the most significant investment in debt advice ever made.

“It will materially increase the amount of debt advice available to people in England, ensure services are built around customers’ needs and be based on modern good public funding practices.

“We’ve asked debt advice providers to tell us how they will deliver what customers need, including through continuing to offer face-to-face services.

“We also want them to consider how other channels – such as virtual appointments – should also form part of the service they offer.”

The Scottish government said it believes people should choose how and when they can access advice it provides – which is a mixture of face-to-face, phone and online services.

The Welsh Government said that before the pandemic most of its advice was face-to-face but remote services have helped since then.

Read more:
Fears over the future of free debt advice

Source : Business Matters More   

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