by Larry Elliott on (#2JQKQ)
The question is not whether inflation will continue rising in 2017 but how high it will go. At least 3%, maybe even higher …It seems so obvious. The Bank of England sets interest rates to hit the government’s 2% inflation target. Inflation is currently 2.3% and – despite holding steady in March – is certain to go higher over the coming months. Higher borrowing costs choke off inflationary pressure. Therefore interest rates should now be going up.In reality, it is a bit more complicated than that. The first thing the nine members of the Bank’s monetary policy committee have to decide is whether the above-target inflation seen in the last couple of months is a temporary blip. It’s quite clear it isn’t. Food is going up, energy companies are raising their tariffs, retailers are passing on the higher costs of imports caused by a weaker pound.Related: UK inflation stays at three-year high of 2.3% Continue reading...