Skip to main content

Should rising domestic inflationary pressure worry the MPC?

Inflation proved unexpectedly sticky in January, remaining unchanged at 3.0%, contrary to the consensus expectation for it to fall. However, we don’t think that the Monetary Policy Committee (MPC) needs to worry about runaway inflation. Indeed, sterling’s past depreciation remains the main driver of above-target inflation, and domestically-generated cost pressures still look a bit weaker than has been consistent with inflation hitting the 2% target in the past. Nonetheless, with signs that pay growth will continue to accelerate, we continue to expect the MPC to increase Bank Rate by more than investors expect this year.

Become a client to read more

This is premium content that requires an active Capital Economics subscription to view.

Already have an account?

You may already have access to this premium content as part of a paid subscription.

Sign in to read the content in full or get details of how you can access it

Register for free

Sign up for a free account to gain:

  • Unlock additional content
  • Register for Capital Economics events
  • Receive email updates and economist-curated newsletters
  • Request a free trial of our services


Get access