High UK inflation could last for ‘years rather than months’, warns economist
The squeeze on British households from high inflation could be bigger and last longer than expected, amid a series of economic shocks from Brexit, Covid and Russia’s war in Ukraine, economists have warned.
Michael Saunders, a member of the Bank of England’s rate-setting monetary policy committee (MPC), said inflation was “uncomfortably high” as households come under pressure from soaring energy, food and fuel bills.
The independent economist, who voted for a bigger rise in borrowing costs last week than most of his MPC colleagues, said he was concerned that expectations for higher inflation could become entrenched for longer than hoped.
“Energy price squeezes are painful. They hit those on the lowest incomes worst,” he said.
His warning was echoed by Andy Haldane, the Bank’s former chief economist who now leads the Royal Society for Arts thinktank, who said high rates of inflation could stick around for “years rather than months”.
Haldane, who was among the most prominent economists to sound the alarm on inflation risks before he quit the Bank last year, told LBC radio station that he wished tougher action had been taken sooner.
Asked if inflation could rise above 10% or go even higher, he said: “It could. I fear it might … I’m slightly fearful, it might stick around for some little while as well. This won’t be come and gone in a matter of months. I think this could be years rather than months.”
Threadneedle Street raised its key interest rate by 0.25 percentage points to a 13-year high of 1% last week to combat soaring inflation, despite warning there were growing risks of a recession caused by the cost of living crisis.
The Bank said the measure for the annual rise in living costs could breach 10% later this year, but then was
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