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Bank of England to look through temporary inflation rise, says Poll Inflation will peak at 2.4% in the final quarter of this year before gradually scaling down, the June 14-17 poll found
LONDON (Reuters) - British inflation can rise above 3% before the Bank of England feels discomfort, according to a Reuters poll of economists who also said the economy would expand faster than previously thought this quarter as more pandemic restrictions are lifted. The central bank has a 2% inflation target, but the rate unexpectedly jumped above that in May for the first time in almost two years and hit 2.1%, part of a post-lockdown climb in prices that is expected to gather pace.
Inflation will peak at 2.4% in the final quarter of this year before gradually scaling down, the June 14-17 poll found. The Bank of England will tolerate it at 3.0-3.5% before feeling discomfort, medians showed. "We think high inflation will be temporary as this year's price rises give way to a sharper fall in inflation next year due to base effects," said George Buckley at Nomura. "At the same time, we expect the BoE to be keen to protect what could prove to be a fragile recovery, with output well below its prepandemic path." Britain has suffered the highest COVID-19 related death toll in Europe, but a fast-moving vaccine roll-out has allowed the government to open up parts of the economy and lift some of the stringent restrictions imposed to stop the virus from spreading.