CPI inflation in the UK is running at 3.1% and the Bank of England expects it to peak at 5% near year. That’s more than double our magic number – so you’d think that rates would be on the up at some speed. Yet despite heavy hints from various policymakers that we would on Thursday see a rise from the lowest-ever base rate of 0.1% to 0.25% we saw no change.

There is some sense in this. The inflation we see at the moment is based on supply problems, rising energy prices and increased labour costs. A 0.15 percentage point rise in interest rates can’t do much to help with these things. And if they are related in the main to pandemic policies and are therefore temporary anyway, why not just ignore them – and let inflation naturally fall back to earth next year as shortage turns to surplus?

Money Week