The Bank has guided all year that inflation would rise through the summer due to base effects, notably from the increase to regulated energy bills in April. It expects inflation to peak around September before underlying weakness in the economy pushes it back down toward 2 percent next year.
The British government could badly do with some support from lower interest rates, given that the cost of servicing its debt is one of the biggest elements of public spending, and given that the government’s climbdown on benefit cuts this month has left Reeves little or no margin of error for meeting her fiscal rule.
The news will sharpen the focus on data from the labor market that are due on Thursday. They’re expected to show another rise in joblessness.
