BoE Governor Andrew Bailey told a parliamentary committee yesterday that inflation could fall back substantially this year. Still, there are risks from labor shortage and China.
“The biggest single reason inflation has risen to that level is the war in Ukraine. It is also the most likely reason that we’re going to see a rapid fall in inflation in the year ahead, because we are not seeing energy prices rising further. In fact, they’re coming down,” he said.
“Going forwards, the major risk to inflation coming down in the way that it will is the supply side,” Bailey said. “In this country particularly the question of the shrinkage of the labor force,” which has pushed up wages.
“First of all in the economic outlook it think it’s quite likely we will see a negative impact in the short run in China from what’s going on at the moment from the release of the Covid restrictions and the impact that’s having,” Bailey said. “I’m not sure that would be very long lasting.”
