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Ekonomické zprávy

High inflation in the UK is likely to persist - Bank of England policymaker

Huw Pill, the Bank of England's chief economist, said high inflation is likely to persist as companies and workers try to pass higher prices on to each other. He also added that the British should accept that they have become poorer.

Pill said that a number of factors have contributed to the rise in inflation over the past 18 months, ranging from supply disruptions due to the pandemic and government programs to support households that increase demand, to the Russian invasion of Ukraine and the subsequent jump in energy prices in Europe. But Pill said that it was “natural” that the behavior of price-setters and wage-setters would change when living costs such as energy bills rise, with workers asking for higher salaries and businesses raising prices. "Of course, this process is ultimately doomed to fail," Pill said.

According to the report from the Office for National Statistics (ONS), consumer prices rose by 10.1% per annum in March after rising by 10.4% per annum in February. Economists had expected CPI growth by 9.8% per annum. Inflation remains above 10% for the seventh month in a row and is more than 5 times higher than the Bank of England's target level (2%), suggesting that policymakers may continue to tighten monetary policy to curb inflation. Meanwhile, core CPI - which excludes energy, food, alcohol and tobacco - rose 6.2% per annum, as in February. This was the strongest growth since December 2022. Consensus estimates suggested an increase by 6.0% per annum. In March, the Bank of England said it expected a "significant decline" in inflation in the second quarter. In February, the Bank of England forecast March inflation at 9.2%.

Pill added that the UK, which is a net importer of natural gas, faced a situation where the goods it buys from the rest of the world have become much more expensive compared to what it sells to the rest of the world, primarily services. "Therefore, the British need to recognize that they are in a worse position and stop trying to maintain their real purchasing power by bidding up prices, whether higher wages or passing energy costs through on to customers," said the Bank of England's chief economist.

According to a number of economists, wages can continue to grow without risk to economic growth, since they have not increased significantly adjusted for inflation, and the corporate world has maintained a comfortable margin. But some argue that the UK is particularly at risk due to its import-dependent economy, a weak pound and a tight labor market.

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