Inflation: Bank of England says price rises to top 4pc by year-end

LONDON - UK inflation is expected to rise above four percent by the end of the year, fuelled by rising energy costs, the Bank of England has warned.

The Bank also said that there were signs the supply chain crisis was starting to hamper the economic recovery, and revised down its growth forecast for the third quarter by one percent.

It came as the Bank’s Monetary Policy Committee held interest rates at 0.1 percent

Despite the inflation forecast a rate rise was not yet needed, the MPC said.

Factors driving higher inflation were still expected to moderate next year, the policymakers said.

Supply constraints were hitting recovery and there are signs “cost pressures may prove more persistent.”

The MPC added that “considerable uncertainties remain”. It said Consumer Prices Index inflation, currently at 3.2 percent, could remain above four percent into the second quarter of next year.

Hinesh Patel, a portfolio manager at Quilter Investors, said the Bank “clearly expects the inflation rate to be higher than previously feared.”

“While they reiterate it will be transitory, it will no doubt be of major concern.

“Ultimately what is flowing through the system right now is ‘ bad inflation’, that is: price rises are hitting the most vulnerable households, alongside the impacts of furlough on unemployment uncertainty,” he said.

Last month, the Bank said it expected the economy to regain its pre-pandemic size in the final three months of 2021 and inflation to hit a 10-year high of four percent at the same time. – BBC.