“Rising inflation amid a bout of fraying economic growth puts the Bank of England in a quandary” says Yael Selfin, Chief Economist at KPMG UK.
“A weaker pound and buoyant retail demand saw milder discounts this summer, with a strong RPI rise of 2.8% expected to hit consumers’ pockets next year as rail prices are set by this rate.
“With inflation now above the BoE target, and the weaker pound causing upward pressures on prices to percolate in coming months, the MPC is likely to feel more unease. However, the expected decline in energy prices in the autumn coupled with a weaker economy, should see inflation moderate in the final months of the year.
“The outlook for inflation is strongly tied with the Brexit outcome, with a no-deal likely to see further falls in the pound and a rise in inflation in the short-term. However, even in a more extreme scenario, we would expect the Bank of England to support the economy and cut interest rates.”
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Notes to Editors:
About KPMG in the UK
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 16,300 partners and staff. The UK firm recorded a revenue of £2.338 billion in the year ended 30 September 2018. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 154 countries and has 200,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.