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Britain may be through the worst of its bout of inflation

Britain may be through the worst of its bout of inflation

SINCE November 2015 the pound has depreciated by over 15% against other currencies, mainly because of worries caused by last year’s Brexit referendum. As the cost of imports has risen, inflation has jumped. Monthly figures released on November 14th showed that in October consumer-price inflation was 3%, the joint-highest level since 2012. Mark Carney, the Bank of England’s governor, was only just spared the embarrassment of having to write an explanatory letter to the chancellor, which he must do if inflation is more than a percentage point away from the bank’s target of 2%. Yet there is some good news for Mr Carney: inflation may soon be on its way down again.

In the 1970s inflation was a scourge on the British economy. As unions battled with employers over wage settlements, it was for a time higher than 20%. More recently inflation has become quiescent. The Bank of England won operational independence over monetary policy in 1997. Since then the annual rate of consumer-price inflation has averaged almost exactly 2%, in line…Continue reading

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