Andrew Bailey, the Bank of England Governor, has braced Britain for a lengthier bout of post-Covid price pressures as inflation rockets towards a 10-year high.
The Bank’s latest forecasts showed the Consumer Prices Index benchmark, which stands at 2.5pc, sharply climbing to 4pc – the highest level since December 2011 – by Christmas.
Its estimates signalled that inflation would remain above the Bank’s 2pc target throughout next year as soaring commodity prices and shipping costs and shortages of crucial components such as semiconductors bite, before finally returning to target in mid-2023.
Mr Bailey said the inflation rise was “marked by historical standards”. Although the Bank insisted that the price pressure would be temporary, it admitted that “some modest tightening of monetary policy” would be needed to hit the inflation target “sustainably” over the medium term.
The MMT lark is going to be tested.
1) Will we have inflation without full employment?
2) Will they stop printing money when the inflation arrives?
3) Will they sell the QE bonds back into the market to cure the inflation?
4) Will the political will to even battle the inflation be there?
Note that the P³ has firm and absolute views on all of those. Me, I’m waiting to see…..