UK inflation could reach 7.5% in April, driven by energy boom

Annual inflation in the UK is expected to reach 7.25% in April this year, pressured by energy prices, Catherine Mann, a member of the Bank of England’s Monetary Policy Committee (BoE), said at an event on Thursday. Federal Reserve (Fed, the American central bank) in Cleveland.

For Michael Saunders, also a member of the committee, however, this effect of energy prices on inflation is likely to be temporary.

“This will raise inflation — and slow real wage growth — for a period. But unless energy prices continue to rise or inflation expectations are destabilized, it is unlikely to generate sustained excess inflation,” Saunders said, speaking at a University of East Anglia event.

According to him, it does not make sense to tighten monetary policy so much in order to return to the inflation target of 2% per year, while the temporary effect of energy prices is at its peak.

“This does not mean that the Monetary Policy Committee has abandoned its commitment to low inflation, but there is little that monetary policy can do with the temporary effects of inflation,” he said.

“The big picture is that while rising energy prices are responsible for much of the excess inflation, it is also true that the economy is in significant excess demand and inflation expectations are not as well anchored as they would like.” , he added.

Saunders said that at the February meeting he was in favor of an interest rate hike of 0.5 point.

Still, he said that stance doesn’t necessarily indicate he will vote by 0.5 point steps if interest rates have to rise further. According to him, the Committee has tools to bring inflation back to the 2% target.

The information is from the newspaper. The State of São Paulo.