KPMG comments on today’s inflation figures - January 2022

Rising inflation poses tricky questions for the Bank of England this year” says Yael Selfin, Chief Economist at KPMG UK.

Today’s data show that prices once again rose above their historic average, causing inflation to climb to 5.4% in December 2021, the highest level for almost 30 years. Shortages of goods, demand for which rose during the pandemic, and high energy prices have both contributed to quickening the pace of price rises. We expect overall inflation to peak at around 6.5% in April this year, before beginning to fall.

While the Omicron wave is expected to subside in the UK over the coming months, the wider implications for global supply chains leave an uncertain outlook.

This leaves the Bank of England facing a delicate balancing act between keeping a lid on future inflation, while not undermining the strength of the economic recovery. On balance, we expect three rate rises this year, taking base rates to 1% for the first time since 2009.