Abstract
▪ Inflation in the UK is set to peak higher for longer than we previously expected. But structural factors plus the likelihood that supply problems will eventually be resolved mean we still think the spike will prove transitory. ▪ We now think that CPI inflation will peak over 4% and remain above 3% until H2 2022. Rising petrol prices in the near‐term and another hefty rise in energy bills likely next April will fuel the increase. ▪ But so far price pressures have been localised, while we see little evidence that higher inflation is feeding into inflation expectations. And even if it did, most workers have less negotiating power compared to past high inflation episodes.
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