A leading business group in the U.K. has forecast that forthcoming interest rate increases from the central bank will keep inflation expectations from becoming entrenched, according to Bloomberg. The Confederation of British Industry said on Monday that the Bank of England is likely to begin raising interest rates at a “slow and steady” pace in the second quarter, and highlighted the need to avoid allowing “inflation to get back into the national psyche.”
CBI Director-General John Cridland said his group was “keeping a very close eye on potential for an inflationary wage spiral.” The central bank is facing increasing pressure to raise rates on soaring inflation, but the “fragility” of the economic recovery has kept policymakers from fiscal tightening. Cridland said that the CBI expects interest rates to remain “at historically low levels,” despite ongoing high levels of inflation. Meanwhile, the Engineering Employers Federation reported that 39% more manufacturers are planning price increases than those planning price cuts as input prices continue to rise.
