Post-pandemic economic recovery is likely to push inflation above 3% “for a temporary period”, the Bank of England’s monetary policy committee predicts.
In its latest statement, the committee said consumer price index (CPI) inflation would reach this rate by the end of 2021, before falling back in 2022.
Recent data from the Office for National Statistics also revealed CPI hit a two-year high of 2.1% in the year to May 2021, up from 1.5% in the year to April.
The committee voted unanimously to keep interest at its current rate of 0.1%, however.
In its policy summary, the committee said its main expectation is that “the economy will experience a temporary period of strong GDP growth and above-target CPI inflation, after which growth and inflation will fall back”.
It added:
“There are two-sided risks around this central path, and it is possible that near-term upward pressure on prices could prove somewhat larger than expected.
“Taking together the evidence from financial market measures and surveys of households, businesses and professional forecasters, the committee judges that UK inflation expectations remain well anchored.”
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