As the Bank of England prepares its inflation report for publication, an economic think tank has warned post-Brexit price rises in the UK could quadruple within the next year. Britain’s Institute of Economic and Social Research is warning the dramatic collapse in the value of the Pound Sterling could see inflation increase to up to four percent while spending power is forced down. CCTV’s Richard Bestic reports from Britain’s financial district, the City of London.
Rising prices at the pump are the most visible sign of what might be down the road for British consumers. Oil traded in dollars, against which the Pound has seen a collapse of almost 20 percent. For shoppers, ingredients of everything from pot noodles to potatoes have been hit by the Pound’s post Brexit dive.
In the technology market, it’s the same story. Apple computers have hiked the price of their top of the line models by as much as $500.
Against this inflationary backdrop the Bank of England is preparing its latest quarterly inflation rate and analysts see a mixed message.
Justin Steward of Seven Investment management said, "The good news is that inflation actually going up, means of course inflation actually erodes debt. So, Britain’s got a lot of debt, so the higher the rate of inflation the faster this debt erodes."
However, the bad news is this: because only in the past couple of years have we seen the rate of inflation fall below the level of wage rises.
In the next few months that is going to change. Inflation will overtake the wage rate and therefore people will feel poorer.
"While Britain’s economists will be trawling through the minutiae of the Bank of England’s quarterly inflation report, it’s now becoming increasingly apparent that the consequences of Brexit are beginning to trickle down to the country’s regular folk and hitting them in the pocket," said Richard Bestic.
The fall in Sterling has been the most striking feature of the economic landscape in Britain since the country voted more than four months ago to leave the European Union.
However, it’s been the role played by Bank of England Governor Mark Carney that has overshadowed the publication of the Bank’s latest inflation report.
Under political pressure, forced to name the day of his departure.
"As Central Banker he was caught in the middle of a political vice and quite rightly he stepped back from that and said he’s going to stay on in his job … not for the full term, but for the time being for part of the term and carry out his job to the best of his ability and frankly I think he’s done the right thing," said Steward.
With government and markets welcoming that, Carney’s role as guardian of the UK economy is set to continue till 2019.
