Commenting on the Bank of England MPC meeting today and the vote to keep its policy rate at 3.75%, Barret Kupelian, Chief Economist at PwC, said:
“The Bank decided to hold its policy rate, but the balance of concern is shifting, with three members judging that the inflation risk warranted higher rates. All members of the Monetary Policy Committee agreed that the outlook for energy prices remained skewed to the upside. Energy prices are the spark, but the Bank is watching for the fire: whether higher costs spread into broader price-setting and wage demands.
“For the UK, an energy supply shock delivers the worst of both worlds: more inflation and less growth. The encouraging point is that the economy is proving considerably more resilient than it might have done a generation ago. But that resilience is not costless. Weaker activity helps contain inflation partly by loosening the labour market, with the Bank’s estimates suggesting that unemployment could rise as high as 5.5%.”
Source: PwC analysis of Bank of England data
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