The current Governor of the Bank of England, Andrew Bailey, has written to the Chancellor of the Exchequer, Rishi Sunak. The letter was dated 16 December 2021 and has been uploaded to GOV.UK. The correspondence related to the recently published figures from the Office for National Statistics (ONS) showing a significant increase in inflation to 5.1%.
The letter addresses the following:
- the reasons why inflation has moved away from the 2% target, and the outlook for inflation;
- the policy action that the MPC is taking in response;
- the horizon over which the MPC judges it is appropriate to return inflation to the target;
- the trade-off that has been made by the MPC with regard to inflation and output variability in determining the scale and duration of any expected deviation of inflation from the target; and
- how this approach meets the Government’s monetary policy objectives.
CPI inflation is expected to remain around 5% through the majority of the winter period, and peak at around 6% in April 2022.