CPI hits 4.2%: we’ve collected experts’ views on what the implications might be

Oracle’s Chief Customer Officer, Emma Sutton discusses how inflation will lead to a rise in consumer prices causing under pressure businesses to face new challenges – creating a perfect storm:

“UK inflation rate soaring past 4% this month, should come as no shock. Afterall, a resurgence in Covid cases and the ongoing supply disruption coupled with customer demand moving much faster than available supply has resulted in inflationary costs that has impacted economic recovery – creating the perfect storm.

“With pressure mounting to meet consumer needs and gear up for the impeding holiday shopping boom, the rise in consumer prices will lead to businesses feeling more than just the pinch. According to Oracle, 74% of UK consumers say that future delays could cause them to cut ties with their favourite brands permanently, a worrying consensus for recovering businesses. 

“To mitigate supply chain issues continuing to hit business’ bottom line, they must be proactive in their approach. To a large extent, disruption has been caused by a lack of supply chain visibility – it’s time for technologies, such as AI, to take the driving seat to optimise operations.” 

Derrick Dunne, CEO of YOU Asset Management, believes investors must act to avoid the corrosive effect of inflation, commenting:

“Today’s figures will no doubt spur speculation as to whether the MPC will finally move to hike interest rates at its December meeting, however this is looking less likely in light of the slowing GDP growth reported by the ONS last week. Just a few days ago in fact, The Bank’s own Chief Economist publicly acknowledged that acting too soon could ‘derail some of the recovery which in some respects is still quite fragile’.

“While The Bank maintains that this period of high-inflation will pass, investors would do well to review their plans and consider their options to counter the corrosive effect of inflation, for example investing in equities or investments which track the inflation rate.”

Shane O’Neill, Head of Interest Rate Trading for Validus Risk Management, believes that BoE critics have been validated by today’s news:

This higher-than-expected print will give the Bank of England incentive to increase rates at their next meeting in December. They disappointed markets in November by holding off on a rate hike despite it being fully priced in – citing slowing demand and growth concerns – critics at the time suggested that the Bank was not acting to curb runaway inflation and this print will go some way to validate these critics.

“After yesterday’s strong employment data, the missing piece of the puzzle according to Governor Bailey, there is seemingly little reason to expect the Bank not to hike, though this thinking has scuppered traders before. If the first post-furlough employment data point, released shortly before the Bank’s December meeting, confirms the strength of the employment market and inflation, as seen today, continues higher – it is going to look more and more like the Bank missed an opportunity in November.”

Commenting on UK inflation rising to 4.2% and the Bank of England needing to be patient, Dan Boardman-Weston, CIO at BRI Wealth Management, noted: 

“This is undoubtedly going to put pressure on the Bank of England to raise rates, which we suspect they will have to do in the next few months given the high levels of inflation and robust labour market. Nothing we see leads us to believe that this inflation is permanent and as we start heading into Spring next year the figures will start falling rapidly. The Bank of England needs to be careful that they’re not too hasty in tightening monetary policy as a policy misstep could do more harm to the economy than this transitory inflation we are witnessing.”