UK Economic Outlook: Autumn 2021 (Inflation)

UK Economic Outlook: Autumn 2021 (Inflation)

In this video Cyrille explains why he thinks UK inflation will hit 5 per cent next year and what it means for the economy. He goes through the factors contributing to inflation, from energy prices to shipping costs. He discusses why the UK economy hits supply constraints earlier than expected. He argues that the Bank of England should raise rates sooner rather than later to prevent a damaging wage-inflation spiral. He concludes by saying what rising inflation means for households’ income.
Overview

In 2022 UK inflation is expected to hit 5% and may take years to fall back down to the Bank of England target of 2%. The recovery from the COVID-19 Pandemic is driving inflation, as companies are struggling to rebuild capacity, are facing increased input prices, shipping costs and are experiencing labour shortages. These higher costs are then passed on to the end consumer. High inflation is harmful to households, it reduces real income and purchasing power.

Key learning objectives:

  • Understand what is causing the rise in inflation

  • Discuss the impact of rising inflation

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Summary
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Expert
Cyrille Lenoel

Cyrille Lenoel

Cyrille is the Principal Economist at the National Institute of Social and Economic Research. As part of his work at NIESR, he has contributed to the development of the National Institute Global Econometric Model and a new National Institute Sectoral Econometric Model. Before joining NIESR in 2017, Cyrille had worked in quantitative roles in the financial sector to develop risk and pricing models. He has two master's degrees, one in Engineering from Ecole Centrale de Nantes, and one in Economics from Toulouse School of Economics.