UK inflation could fall rapidly as energy prices drop, says Bank boss

The governor of the Bank of England has said there could be a “rapid” fall in inflation in Britain amid a drop in global energy prices over recent weeks but warned that a shortage of workers could still pose major risks amid the cost of living crisis.

by | 16 Jan, 2023

Andrew Bailey told MPs on the Commons Treasury committee that the UK’s rate of inflation could fall back substantially this year after hitting the highest levels since the early 1980s during the autumn after Russia’s invasion in Ukraine led to an increase in wholesale energy costs.

“The biggest single reason inflation has risen to that level is the war in Ukraine. It is also the most likely reason that we’re going to see a rapid fall in inflation in the year ahead, because we are not seeing energy prices rising further. In fact, they’re coming down,” he said.

The headline rate of annual inflation as measured by the consumer prices index fell back to 10.7% in November from a 41-year high of 11.1% a month earlier. Official figures for December, due on Wednesday, are expected to show a further modest decrease to 10.6%. That would still be well above the Bank of England’s 2% target.

Answering questions from MPs on the stability of the UK’s financial system, Bailey said a risk premium on UK assets seen in the wake of Liz Truss’s disastrous mini-budget in September was now “pretty much gone”, although cautioned that confidence in the UK remained fragile.

Read more at The Guardian

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