Life will “get difficult” for Britain’s most vulnerable as rising inflation due to a slump in sterling pushes up the price of fuel, food, and clothing, Bank of England Governor Mark Carney has warned.
Speaking in Nottingham at a public roundtable event, Carney said inflation was likely to go over the Bank’s official two percent target next year.
But he said the bank was “willing to tolerate a bit of an overshoot” to avoid unnecessary employment.
He added it was not the Bank’s responsibility to make decisions based on uneven social impacts of higher prices.
“We care a lot about distribution but we are not a political entity,” he said, according to the Independent.
He added that the Bank was justified in cutting rates to a historic low of 0.25 percent in August. He said between 400,000 and 500,000 jobs could have been at risk if it had not done so.
The pound has fallen by about 18 percent since the UK’s vote to leave the EU in June, as foreign investors wait for signs of Britain’s new trading agreements with the rest of the world. It slumped to its lowest level in 168 years.
The cost of importing goods is rising, and businesses will have to pass these costs on to customers or risk losses, Food and Drink Federation Director General Ian Wright says.
“If these price hikes persist, there are pretty undesirable possible outcomes: retailers put up prices, manufacturers and or retailers take the hit, or consumers lose choice,” Wright told The Times.
Drivers should also prepare for a rise in gasoline prices. Chairman of the Petrol Retailers Association Brian Madderson warned this week that motorists could expect increases of up to 5 pence (6 cents) per liter by the end of the month, unless there are favorable corrections to exchange rates or oil prices.
Other prices are on the rise. Last month, Apple put up the price of its new iPhone by £60 ($73) when the model went on sale in the UK, despite there being no price rise in the US.
The Bank’s most recent forecasts from August show consumer price inflation hitting two percent in the third quarter of 2017 and rising to 2.4 percent in the second half of 2018. The current rate of inflation is 0.6 percent.
Other economists expect prices to rise even more rapidly. Some predict inflation will hit three percent by the end of next year as imports of food and fuel become more expensive.
The Bank has signaled it may cut interest rates again later this year.