Interest rates are likely to fall further after the UK passes an inflation \u201chump\u201d caused by a rise in food and basic living costs, according to a Bank of England rate-setter.<\/p>\n
Sir Dave Ramsden, a deputy governor at the Bank of England, said he was confident that inflation would fall back to the central bank\u2019s 2 per cent target amid a weakening in the jobs market and slower wage growth.<\/p>\n
\u201cWe have seen the labour market continuing to loosen<\/a> with wage growth normalising and I see that as supporting a continuation of the core disinflation process. And that anchors my view on the inflation outlook\u201d, Ramsden said during a discussion on the issue organised by the European Central Bank in Frankfurt.<\/p>\n Figures from the Office for National Statistics show that unemployment is close to a four-year high of 4.7 per cent and that wage growth eased to the lowest level in three years in the past quarter. <\/p>\n Ramsden said that the government\u2019s decision to increase payroll taxes by \u00a325 billion<\/a> had put upward pressure on food inflation, a long-held assumption within the Bank of England. Food inflation hit 5.1 per cent in August, a 19-month high, according to the ONS. <\/p>\n The Bank has forecast that headline inflation will peak in September at 4 per cent, up from 3.8 per cent at present.<\/p>\n Ramsden added that household expectations for future inflation had risen sharply because of an increase in grocery prices, which tend to be more obvious to consumers compared with price increases for other products. According to the Bank, at 3.8 per cent, long-term household inflation expectations have hit their highest level since 2019.<\/p>\n