UK inflation could “comfortably exceed” 5% by the spring when energy bills are set to rise again, the Bank of England’s deputy governor has warned.
In a speech in Leeds, Ben Broadbent added that the country’s tight labour market is also likely to be a more persistent source of inflation.
It comes after the latest rate of Consumer Price Index inflation came in at a near-decade-high of 4.2% for October, soaring from 3.1% the previous month.
The Office for National Statistics is set to reveal the latest inflation figure for November next week.
At 4.2%, the latest rate of inflation is more than double the Bank of England’s Monetary Policy Committee’s target rate of 2% and is set to soar further.
Mr Broadbent said: “Despite relatively weak growth over the past two years as a whole, domestically and globally, inflation has risen very significantly. In this country it was over 4% in October.
“In the spring of next year, when the next rise in the Ofgem cap on gas and electricity bills comes through, it will probably climb comfortably through 5%, a long way north of the MPC’s 2% target.”
The deputy governor was among seven of the bank’s MPC members to vote to hold interest rates last month.
Investors had expected an interest rate rise at the meeting, but forecasts for a rates rise from 0.1% to 0.25% have cooled in recent weeks due to the emergence of the Omicron variant.
Mr Broadbent also said the recent rise in inflation for goods, which has partly been caused by supply chain pressure, is likely to fade and potentially reverse before a rate rise would have an impact.
He added: “I still think it’s more likely than not – looking a couple of years ahead, as we should – that these pressures on traded goods prices are more likely to subside than intensify.”
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