As it is, the Bank expects consumer price inflation to reach 4pc by the end of the year. The danger is that the surge raises inflationary expectations and therefore becomes a permanent fixture. If people expect higher inflation, it promotes a culture among companies of profiteering price rises even when not strictly justified by rising costs.
Companies do not raise prices because such are justified by rising costs. Companies are run by capitalist bastards. They’ll rook the consumer. If they can of course. So, and therefore, they’ll raise prices if they think they can. At any one time they’ll charge the maximum they can get away with.
This is tempered by competition of course.
So, if other folks are raising their prices then more will think that they can get away with raising prices – that’s how cost changes get into rising prices.
But inflation expectations? No, it’s that the consumer is expecting inflation – that’s the expectations bit – and therefore can be rooked by rising prices.
The justification for price rises in a capitalist market economy is that the producer can raise those prices, nothing more. Whether they can get away with it is what changes in an inflationary environment.