Bank of England’s inflation response ‘risks higher interest rates for longer’

AI desk brief

Niesr warned that the Bank of England’s increase from 3.75% to 4% last week was insufficient, forecasting inflation above its 2% target until at least 2030. UK inflation stands at 3.5%, and director David Aikman expects it above 4% in the new year, risking inflation-linked 2027 pay awards. Its forecasts assume $105-a-barrel oil; Brent briefly fell below $90 on Tuesday, but Niesr warned shipping and refining problems could delay consumer-price relief. Persistent energy inflation could support gold’s inflation-hedging appeal, while tighter policy could counter that support if expected real yields rise; nominal rate increases alone do not establish that channel.