BoE governor Andrew Bailey was making his annual Mansion House speech last night and the thrust of his message falls into line with expectations set by recent commentary from other central bankers, namely that the rise in inflation is seen as temporary.
In his speech, Bailey said there were at least three reasons why the increase in inflation would probably be temporary.
They included distortions caused by comparing prices now with those of a year ago during the first lockdown; shortages of supplies caused by a rush of pent-up demand and pandemic-linked bottlenecks; and a return to spending on services which would smooth out demand that has been concentrated on goods.
There is also the risk of new virus cases and the delay's in social distancing rules, the wider re-opening of the economy [especially travel and leisure].
As well as inflation, the BoE is concerned about a possible rise in unemployment.
The government began requiring employers to start contributing to the cost of keeping on furloughed workers from Thursday and was due to end the scheme at the end of September.
Bailey said in his speech on Thursday that a spike in average earnings was in large part due to heavy job losses in low-paying sectors such as hospitality which had been hardest hit by the pandemic.
Which is a theme of the US Fed, who of course have a dual mandate meaning the monetary policy goals of the Federal Reserve are to foster economic conditions that achieve both stable prices and maximum sustainable employment.
Well its a good job its the first Friday of the month which means non-farm payrolls. Interestingly the employment picture in the US is such that sign on bonuses have become commonplace [where the new recruit gains an upfront bonus payment for agreeing to take the job] even some Burger King stores have a $1500 sign on bonus! Even in the UK there is a wide spread shortage of truck drivers with the Road Haulage Association suggesting there is a shortage of 60000 drivers. Did someone say wage inflation?
Elsewhere there is announcement that the G7 have agreed a global minimum tax rate of 15%. All very interesting but it reminds me of those UN meetings where everyone in the room is demanding action, yet with one contrarian voice, the UN time and time again has become a great big nothing done. This will surely be a feature of this tax ambition because currently Ireland has a 12.5% rate and has naturally said "NO". to 15%. Other nay-sayers are Estonia, Hungary and Nigeria.