Bank Of England Now Expects Inflation To Rise From 9 To Above 11 Percent In October

16th June 2022

CPI inflation is expected to be over 9% during the next few months and to rise to slightly above 11% in October. The increase in October reflects higher projected household energy prices following a prospective additional large increase in the Ofgem price cap.

In the MPC's latest forecasts in May, upward pressure on CPI inflation was expected to dissipate over time. In the main, this reflected the stabilisation of the prices of commodities, albeit at elevated levels, and other tradable goods. It also reflected the combined impact of weaker real incomes and tighter monetary policy on domestic demand. Monetary policy is also acting to ensure that longer-term inflation expectations are anchored at the 2% target.

The MPC’s remit is clear that the inflation target applies at all times, reflecting the primacy of price stability in the UK monetary policy framework. The framework also recognises that there will be occasions when inflation will depart from the target as a result of shocks and disturbances. The economy has recently been subject to a succession of very large shocks. Monetary policy will ensure that, as the adjustment to these shocks occurs, CPI inflation will return to the 2% target sustainably in the medium term, while minimising undesirable volatility in output.