Former Bank of England policymaker Michael Saunders welcomed March’s lower inflation but warned it may be short-lived. He said rising energy bills, tax hikes, and fallout from US trade tensions could push UK inflation above 3% next month, while also slowing growth, investment and potentially increasing unemployment later this year. Report by Covellm. Like us on Facebook at http://www.facebook.com/itn and follow us on Twitter at http://twitter.com/itn
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00:00The inflation rate was a little bit lower than the Bank of England had been expecting,
00:04so that's good news for them. But you have to be aware that for the inflation figures,
00:09and indeed for all of the economic figures, we're kind of in the lull before the storm.
00:15So next month, we get a lot of increases in costs, gas prices, electricity prices,
00:21water charges, which are likely to send inflation in the UK higher, probably above 3%.
00:27We also get the big rise in firms, employers, national insurance contributions,
00:33which may well also be passed through onto firms' costs.
00:37And we'll start to see effects of the trade war, which has been unleashed by US President Trump,
00:44not hitting UK inflation, but hitting the economy generally, hitting exports, hitting investment,
00:51probably also unleashing a wave of relatively cheap Chinese imports coming into the UK,
00:55stuff which would otherwise have gone to the US is now going to be looking for new markets.
01:01Now, that's probably all going to damage growth in the UK, and that will be helping to limit
01:06the upward pressure on inflation. For inflation to be heading above 3%, which is probably where
01:11we are next month, is uncomfortable for a central bank that's targeting 2% inflation.
01:17But at the same time, the economy has been sluggish.
01:19And we're about to get these big hits on growth from Trump's trade wars.
01:24That will hit the UK's exports, it will hit investment, and probably lead to rising unemployment
01:31later this year. So both sides of the economy, inflation and growth,
01:36are going to be looking fairly uncomfortable.
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01:41So both sides of the economy will be glad these little parties will be looking at this point.
01:46So leaves us for a long time having to be susceptible to the US.
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