Bank Hints At Rates Rise Over Fears Of 'Persistent Inflation'

THE Bank of England has warned of a risk of "persistent" inflation as it indicated another interest rate rise is on the way.

- Sam Lister

Chief economist Huw Pill said the country is probably in a recession and tough economic conditions ahead mean inflationary pressures could remain.

He also warned that even falling gas prices may not be enough to end high levels of inflation as homes and businesses struggle to keep pace with living costs.

In a speech in New York, Mr Pill said the longer that firms try to maintain real profit margins and employees try to maintain real wages "the more likely it is that domestically generated inflation will achieve its own self-sustaining momentum even as the external impulse to UK inflation recedes".

Bottlenecks

The economist said higher natural gas prices, a tight labour market and global supply bottlenecks create "the potential for inflation to prove more persistent".