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Inflation could reach eight per cent in coming months, Bank of England warns Coventry and Warwickshire companies

Inflation is likely to reach eight per cent in the coming months and perhaps even higher later this year, businesses in Coventry and Warwickshire have been told.

The Bank of England increased its interest rate to 0.75% last week, placing Bank Rate at its highest level since March 2020 when the Covid-19 lockdown began.

Businesses have been advised that some further rate rises may be appropriate in the coming months, but there are risks on both sides of that judgement, depending on how prospects for inflation evolve.

Speaking at the latest Coventry and Warwickshire Chamber of Commerce roundtable event, Graeme Chaplin, the Bank of England’s Agent in the West Midlands, said: “At the moment it is an incredibly difficult time following the Russian invasion of Ukraine.

“Not only is it a humanitarian tragedy, but it is also a shock to the global economy, putting pressure on supply chains in areas like metals, wheat and gas.

“Prices have rocketed and we are now looking at CPI inflation hitting eight per cent in the second quarter of this year.

“If the latest rises in gas and electricity futures prices are sustained, Ofgem’s household utility price caps, when reset in October 2022, could be around 35% higher.

“Unfortunately, household incomes will be squeezed by these rising cost pressures.

“Rest assured that the Bank’s Monetary Policy Committee will continue to set interest rates to meet the two per cent inflation target, and in a way that helps to sustain growth and employment.”

As well as hearing about the state of the economy, businesses from across the region spoke to Graeme on issues they are facing with the supply chain and difficulties to hire, but also on some of the opportunities for growth.

Sean Rose, head of policy at the Coventry and Warwickshire Chamber of Commerce, said: “It was great for our members to meet Graeme in person for the first time in more than two years and receive an update on the Bank of England’s forecasts.

“This was also an opportunity for members to talk through some of the issues their businesses are facing – particularly in light of global events – and this will help to give the Bank a clearer picture of how firms in our region are performing and might perform in the weeks and months ahead.”

This was posted in Bdaily's Members' News section by Matt Joyce .