Inflation’s Rough Day for the Chancellor
Turns out the big boss of the Bank of England got a nasty hit this Wednesday. Economists say January’s inflation has spiked again—the second consecutive bump.
What the Numbers Say
- December saw inflation climbing to 4 %.
- Readers were already braced for a rise to 4.2 % for January.
- Samuel Tombs of Pantheon Macroeconomics predicts it will be exactly 4.1 %—then might drop to 3.4 % later.
Why Households Are Feeling the Heat
The cost of living has shot up faster than the end of last year, and even though inflation is now a straw‑thin half of where it was a year ago, families still feel the squeeze.
Bank of England’s Tight Graft
The MPC (Monetary Policy Committee) aims to keep inflation down to that sweet spot of 2 %. If rates stay above 4.1 %, we’re likely to wait for a rate cut.
Rob Morgan, Charles Stanley’s chief analyst, pointed out:
“Higher wages today crank up tomorrow’s buying power, which in turn pushes demand and inflation up. The Bank is watching earnings growth closely.”
“Stubborn wages keep consumer prices sticky. A 10 % jump in the national minimum wage set for April could raise both employer costs and household spending, pulling prices further up.”
EY’s Take
Martin Beck from EY Item Club says the latest pay data should soothe the MPC’s concerns about a tight labor market. Yet they’ll still consider April’s wage hike before making moves.
He adds:
- Expect the MPC to cut rates in May.
- Followed by a series of trims through the year.
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