Bank of England Sounds Alarm on Rising UK Inflation Risks

The Bank of England has warned that inflation risks in the UK are rising due to energy and food price pressures. Governor Andrew Bailey told MPs that conflict-linked oil disruptions and extreme weather events are increasing the risk of higher inflation later this year.

UK food inflation, which slowed to 1.3% in July, is now forecast by Capital Economics to peak at 5% next summer due to drought and El Niño conditions. Bailey said policymakers will need to reassess their forecasts based on incoming data.

The Bank of England already factors in food inflation rising to about 3.5% by the end of the year, but Bailey warned that continued disruption to crude shipments could cause a further acceleration in inflation.