UK: Bank warns inflation spike could jeopardise interest rate cuts

Inflation is set to rise sharply, potentially jeopardising the chances of interest rate cuts, the deputy governor of the Bank of England warned yesterday.

“We have seen big rises in the world prices of oil and food,” said Sir John Gieve. “That is being amplified in the UK by a fall in sterling and is now coming through in our food, petrol, gas and electricity prices. These are likely to raise our inflation rate well above target in the coming months, at a time when short-term inflation expectations remain uncomfortably high,” he added.


Inflation is already marginally above the Bank of England’s 2 per cent target, with the consumer price index standing at 2.1 per cent in December. The Bank now has to weigh the dangers of a sharp increase