BoE boss warns of ris­ing in­fla­tion on weak pound

The Myanmar Times - - Business -

BANK of Eng­land chief Mark Car­ney warned that Bri­tish in­fla­tion would re­bound in the com­ing months as the Brexit-fu­elled slump in the pound sparks price hikes.

Mr Car­ney, ad­dress­ing law­mak­ers on the in­flu­en­tial Trea­sury Se­lect Com­mit­tee, cau­tioned that “in­fla­tion is go­ing up [and] that’s a con­se­quence of a very large move” in the ex­change rate.

His com­ments came how­ever as of­fi­cial data showed that Bri­tish an­nual in­fla­tion had ex­pe­ri­enced an un­ex­pected slow­down in Oc­to­ber from a two-year high.

The 12-month in­fla­tion rate de­clined to 0.9 per­cent com­pared with 1pc in Septem­ber, the Of­fice for Na­tional Statis­tics (ONS) said.

That un­der­shot mar­ket ex­pec­ta­tions for a slight in­crease to 1.1pc, as in­fla­tion­ary pres­sures sub­sided on smaller-than-an­tic­i­pated hikes in the cost of cloth­ing and tu­ition fees.

“In­fla­tion was lower than we ex­pected for Oc­to­ber,” Mr Car­ney said in his grilling be­fore MPs.

For its part, the ONS main­tained that there was “no clear ev­i­dence” that the plunge in the value of the pound since the shock EU exit ref­er­en­dum was cur­rently bump­ing up shop prices.

How­ever, the BoE chief stressed this did not change the over­all out­look for ris­ing in­fla­tion on the re­cent slump in the pound against the euro and dol­lar.

Mr Car­ney had de­cided ear­lier this month that he would re­main gover­nor un­til June 2019, one year longer than ini­tially planned, to aid an “or­derly tran­si­tion” to Brexit.

The ONS also re­vealed that the price of goods leav­ing fac­to­ries in Bri­tain jumped fur­ther last month – and partly blamed the slid­ing pound which has lifted im­ported raw ma­te­rial costs for UK firms.

Pro­duc­ers’ out­put prices ad­vanced 2.1pc in Oc­to­ber from the same month a year ear­lier, ac­cel­er­at­ing from 1.3pc in Septem­ber.

That was the fourth con­sec­u­tive monthly gain, af­ter two years of fall­ing prices, and rep­re­sented the largest in­crease since April 2012.

“The in­crease in pro­ducer price in­fla­tion can be at­trib­uted to the changes in the pound ex­change rate,” the ONS noted.

“The sur­prise fall looks like a blip, as ster­ling weak­ness con­tin­ues to raise the cost of in­puts for UK busi­nesses,” noted Ben Bret­tell of stock­bro­ker Har­g­reaves Lans­down. “It will only be a mat­ter of time be­fore this feeds into higher con­sumer prices.

“The Bank of Eng­land now ex­pects in­fla­tion to hit 2.7pc next year, but some an­a­lysts are pre­dict­ing it will reach 4pc as ster­ling weak­ness pushes up im­port costs,” he added.

The pound tum­bled fol­low­ing Bri­tain’s shock June 23 vote in favour of leav­ing the Euro­pean Union, strik­ing 31-year dol­lar lows and 7.5-year troughs against the euro.

It has since clawed back some ground af­ter Lon­don’s High Court re­cently ruled that the gov­ern­ment must seek par­lia­men­tary ap­proval be­fore trig­ger­ing Brexit. –

Photo: AFP

Mark Car­ney warns of a very large move in the ex­change rate.

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