In an interview with Bloomberg TV today, BoE Deputy Governor Dave Ramsden highlighted that services inflation, accounting for 45% of the consumer basket for CPI inflation, has been unexpectedly resilient at 6.6%. This figure, he noted, is an indication that UK inflation is increasingly becoming “home-grown.”
Ramsden expressed concern over the stubborn nature of inflation, attributing it to factors such as high wage growth, which remains above 7%. Given the labor-intensive nature of UK’s service sector, these wage pressures are a significant contributor to persistent inflation. This situation leads BoE to anticipate that inflation “is going to stay stubbornly high through next year.”
Regarding monetary policy, Ramsden stated that it would need to remain “restrictive for an extended period of time” to effectively bring inflation down from its current level of 4.6% to the Bank’s target of 2%.