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- Latest: Cleaning company McBride hit by raw material cost surge
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A Bank of England policymaker has suggested that UK interest rates could rise in the next year, if the recovery continues and rising prices lead to ‘more persistent’ inflationary pressures.
Michael Saunders, a member of the Bank’s Monetary Policy Committee which sets rates, told an online session this morning that the economic outlook would determine when interest rates will rise from their current record low of 0.1%.
If the economy continues to recover, and inflation shows signs of being more persistent, then it might be right to think of interest rates going up in the next year or so.
Related: Inflation set to surge this autumn as Brexit and Covid combine
My own view at the August meeting was that with the recovery in the economy, and inflation back to target, we no longer need as much monetary stimulus as previously.
I also worry that continuing with asset purchases when CPI inflation is 4% and the output gap is closed – that’s the likely situation later this year – might well cause medium-term inflation expectations to drift higher.
Such an outcome could require a more substantial tightening of monetary policy later and might limit the committee’s scope to respond promptly the next time the economy needs more stimulus.
BoE’s Saunders
* May be right for rates to rise over next year
* More QE risks boshing price expectations
* Inflation drivers transitory
* UK economy probs at Q4 2019 level
* Brexit, via slower capital stock growth and labour supply, may have bigger long-term impact vs COVID
Here you go Shaun – it’s a YouTube live thinghttps://t.co/bylfTA9kaa
BoE’s Saunders
– Inflation has risen fasted than expected
– It might be right to think of rates going up in the next year or so, depending on economic conditions
Cleaning product maker McBride has warned that the prices of its products will rise, as it passes on a surge in raw material costs that have eaten into its profits.
The size of cost increases in materials including plastics, cardboard and surfactants is unprecedented and is coupled with challenges with freight availability and costs adding further inflationary pressures.
Compared to one year ago, cardboard is priced more than 50% higher, Ethylene is 50% up impacting on plastics and surfactants and certain solvents over 300% higher. On average, the Group is predicted to see the peak of these raw materials in the autumn this year with the most impacted division, Liquids, seeing raw materials nearly 20% higher than one year ago.
“This year has been one of two halves, with a strong first half followed by a more difficult second. In our recent trading update we highlighted the supply side cost inflation being felt due to rapidly increasing raw material costs and freight capacity.
The £10m of savings expected in the current financial year leave us well placed to meet these challenges and our efforts to recoup input cost rises from customers continue.
Cost of cleaning products set to rocket, warns manufacturer https://t.co/0fDUUt13GG