With inflationary pressures all too visible, Threadneedle Street could perhaps be slightly more worried
Inflation is “likely to exceed 3% for a temporary period”, says the Bank of England’s monetary policy committee, which would prefer the emphasis to be put on the word “temporary”. The rate-setters, or most of them, are sticking to their script: once the inevitable strong period for growth and inflation is out of the way, both readings will fall back, so there’s no need to be alarmed.
The benign view has a lot going for it, of course. Inflation plunged last year during lockdowns and the reopening phase was bound to produce a spike of some size. May’s inflation reading was 2.1%, a relative surge from just 0.7% in March. But if the peak proves to be 3%-ish, the “transitory” narrative – central bankers’ favourite word these days – would still be intact.
