Continue to raise interest rates in February? Britain's inflation hit a 30-year high as Pele hinted that prices were rising

Britain's Consumer Price Index (CPI) rose 5.4 percent year-on-year in December on Wednesday, up 5.2 percent from expectations and up 5.1 percent the month before. Inflation in the UK unexpectedly surged to its highest level since 1992 in December, increasing pressure on the Bank of England to raise rates again. Subsequently, Bank of England Governor Andrew Bailey hinted that britain's inflation outlook could deteriorate. He pointed out that the prospect of wages and soaring natural gas prices is not optimistic.

In his testimony on financial stability, Pele told lawmakers that tensions in Ukraine could pose a risk of continued rise in gas prices, posing a "very big concern" for inflation in the UK. Bailey also believes that rising wage pressures could plunge the UK into a wage-price spiral. For example, a team of garbage pickers in the UK's local government received an 11% raise this week.

A British MP said it would anger the public if the Bank of England ignored the severity of wage inflation pressures. Bailey said: "Please don't think we don't think it's serious pressure. They really are. ”

The market expects the Bank of England to raise interest rates to 0.5% in February to curb inflation. But while record vacancies have put upward pressure on wages, wages are not expected to keep pace with rising prices, leading to shrinking household incomes in the UK.

Pele said the fees british businesses pay for new hires could lead to more general wage increases. "If that causes people to do roughly the same jobs but pay differently, then it could lead to higher inflation," he said.

Since the Bank of England released its latest forecast last November, the market's expectations for future gas prices have been sharply raised, and the market currently expects natural gas prices to remain high until the end of 2023.

Pele said the expectation reflected the growing tension between Russia and NATO on the Ukrainian border. "I have to be honest about a concern if gas prices continue to rise," he said.

However, Bailey added that the cost of living crisis faced by UK households this year could reduce the amount of money available for consumption in their pockets, thereby dampening demand and causing unemployment to rise, so lower inflation in the longer term.