Huw Pill says inflationary pressures still likely to be temporary and will fall back after disruptions of Covid and Brexit
Huw Pill, who replaced Andy Haldane at Threadneedle Street last month, said inflationary pressures were still likely to prove temporary and would fall back over time, as the economy adjusted after disruption caused by Covid and Brexit.
However, in his first public comments since taking the role, he warned there were growing risks that elevated levels of inflation could persist next year.
Writing to MPs on the Commons Treasury committee, he said: “That balance of risks is currently shifting towards great concerns about the inflation outlook, as the current strength of inflation looks set to prove more long lasting than originally anticipated.”
“The magnitude and duration of the transient inflation spike is proving greater than expected,” he added.
It comes as a survey of more than 8,000 UK companies by the Office for National Statistics (ONS) found almost a third of firms in Britain are suffering from the price of goods and services rising by more than would be considered normal.
The ONS said as many as 29% of firms in the regular survey reported a sharp rise in prices of materials, goods and services bought in the last two weeks. This has risen from 21% of firms reporting unusually rapid growth in costs in May, and 14% in late December 2020.
Reflecting severe shortages of building materials, including cement, plasterboard, timber and power tools, more than half of companies in the construction industry reported a sharp jump in costs, the highest of any sector of the economy.
The Bank warned this month that inflation will rise to more than 4% this winter amid soaring wholesale gas and electricity costs, with the gauge for the rising cost of living expected to remain elevated until at least summer 2022.
Figures from the National Grid show the price of gas has more than doubled since the start of the year, with a 213% increase since 1 January, and prices having grown by 71% since the start of August alone.
Separate figures from the ONS showed a sharp 5 percentage point rise in consumer credit and debit card purchases in the week to 30 September, reflecting a dramatic surge in spending on petrol and diesel amid panic-buying at service stations.
In a signal of more people staying at home or using public transport to avoid long queues to buy petrol, traffic levels in London – where fuel shortages have proven most persistent – fell by 7% in the week ending 3 October.
Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, said anecdotes from truckers, turkey farmers, builders and bosses about escalating problems in the supply chain were far from isolated cases.
“There are increasingly concerns that the UK is being caught in an inflationary spiral, with little end in sight for soaring prices,” she said.