Inflation in America has picked up to its highest rate in almost 40 years, raising fresh speculation that the US Federal Reserve could speed up plans to taper its stimulus measures.
The rise in the headline rate of inflation from 6.2 per cent in October to 6.8 per cent last month, driven up by booming energy costs, will raise questions about whether Britain will have experienced a similar increase in the cost of living.
November inflation figures for the UK are due on Wednesday, with the Bank of England taking a decision on monetary policy a day later. Expectations that it will lift base rate from its three centuries’ low of 0.1 per cent have receded amid fears that restrictions to curb the spread of the Omicron Covid-19 variant will slow economic growth.
The consumer prices index in the Unitedf States rose by 0.8 per cent last month over October, the Labor Department said, pushing the year-on-year figure to 6.8 per cent, the biggest rise since June, 1982. The month-on-month rise was higher than the consensus 0.7 per cent that had been forecast by analysts and comes after data showing US unemployment falling to a 21-month low of 4.2 per cent.
“With supply shortages likely to stick around until next year and services sector prices trending higher, inflation is going to get worse before it gets better,” Sam Bullard, of Wells Fargo, said.
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Jerome Powell, chairman of the Fed, has said the central bank should consider speeding up the winding down of its massive bond purchases, known as quantitative easing, at its policy meeting next Tuesday and Wednesday. Many economists are expecting an early Fed interest rate increase.
Ruth Gregory, of Capital Economics, said that she expected the UK inflation rate to rise from 4.2 per cent to 5 per cent in next week’s data. She said that the plan B restrictions meant that the British economy was now probably contracting and there were downside risks to the first quarter of 2022. “Against this backdrop, we no longer expect the Bank of England to raise interest rates from 0.1 per cent.”
