Donald Trump was the marauding elephant in the room when the Bank of England voted to hike rates.
Before the warmongering US President – along with Israel – began the conflict with Iran in late February, all the signs were that inflation in the UK would fall to the long missed 2% target. That’s not a number, it means living costs for millions of households finally easing.
Now the Bank reckons inflation could jump to almost 5% by the middle of next year. The reason? The energy shock caused by the Middle East war’s global fall-out.
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In an “adverse scenario”, inflation could rocket to 6.2%, the Bank said. That’s based on oil prices shooting back up from below $100 a barrel to $130. If that seems unlikely, it’s been at almost $120 during the war.
A jump in Ofgem’s price cap looks like a dead cert in January, given its ‘window’ for factoring in wholesale costs closes in two weeks’ time. As it stands, the cap will surge from an average of £1,723 a year to more than £2,100. And experts are warning of another rise in April.
Chancellor John Healey’s Budget measures to help with energy costs will take some of the sting out of the leap for those who qualify. But make no mistake, millions of people are fearful of putting the heating on regardless.
Food inflation could jump to 4.75% next year, says the Bank, although intense supermarket competition means experts have been proved wrong on that front before.
It’s not all bad, with the UK economy having defied doom mongers this year, and is growing faster than most of our competitors.
And unemployment hasn’t shot up, as economists warned, with the jobless rate actually falling at the last count. The Bank doesn’t expect the unemployment rate to rise much next year, even in its “adverse” scenario.
But forecasts are just numbers on a page, and what really matters are real world events. And for those, most roads lead back to President Trump again.
He’s seen as a lame duck after the Republicans were humiliated by the Democrats in this week’s mid-term elections. But he’s still the President and set to reside in the White House for another two years.
Wounded and weakened, yes, but all eyes are on what his next moves will be.
A miraculous resolution to the Middle East conflict and, by God it’s needed, the Ukraine war, and inflation could start to come down and the threat of more rate hikes reduced.
Anything else and more hikes look inevitable. And the next could yet come before Christmas, leaving President Trump or Bank Governor Andrew Bailey – perhaps both – delivering a festive message worthy of the Grinch.
