Britons are already experiencing inflation ‘biting” into their household incomes. The Bank of England governor said this today that the Bank of England will continue to hit hard this winter. 

Andrew Bailey expressed regret for the situation and warned that higher energy prices could be permanent as a result of the switch away coal-based to combat climate change.  

‘Inflation is obviously something that bites people’s household income. He said that inflation is already affecting their household income in terms of rising prices.

“I’m very sorry that this is happening. We don’t want that to happen.

Wholesale oil and gas prices have risen substantially during 2021, as shown in this graph from the Bank

This graph shows that wholesale oil and gas prices have increased substantially in 2021, as illustrated by the Bank

This graph shows how energy prices are projected by the Bank to account for a large part of the near‑term pickup in inflation

This graph shows how energy prices are projected by the Bank to account for a large part of the near‑term pickup in inflation

Bailey predicted that inflation would be caused by rising energy costs, particularly for gas. He also said that prices could rise due to the global switch from net zero to net one.  

He stated, “It is reasonable and necessary that we might transition form more polluting to less polluting oil to eventually let’s hope that we emerge in a more complete and renewable economy.” 

“So it’s possible that some of the changes we’ve seen in gas prices are already climate change taking effect if there’s an outright switch from coal. 

“Then, part of it would consist of permanent higher prices, and not higher inflation but a level increase in prices.

In the last year, gas prices have risen as high as 400%. 

The Banks Monetary Policy Committee has released projections about the expected hit to household wealth from rising inflation or taxes.

It was suggested that tax increases would account for the majority of the 2023 hit, as long as inflation is at a constant pace.   

The Bank’s gloomy forecast indicated that it does not believe that energy prices will fall soon.  

Mr Bailey’s comments coincided with new data which showed the average UK house price hit a record high of £270,027 in October.

The average property value grew by 0.9% in October – showing an increase of more than £2,500 during the month, Halifax said.

Yesterday, the Bank of England’s Monetary Policy Committee report stated that inflation as measured by the Consumer Price Index has already risen markedly to more than 3% due to supply chain bottlenecks soaring energy costs and supply chain ‘bottlenecks. 

The Bank also released this graph showing its gross domestic product projection based on market interest rate expectations

This graph, which is based upon market interest rate expectations, shows the Bank’s gross domestic products projection.

The Bank of England produced this graph showing its CPI inflation projection based on market interest rate expectations

This graph, which shows the Bank of England’s CPI inflation projections using market interest rate expectations, was created by the Bank of England

The MPC believes that inflation will remain slightly above its 2 percent target in two year’s time, although it should drop after that.

The Bank shocked markets by holding off raising interest rates. But, Mr Bailey, the Bank’s governor, stated at a press conference that this will happen within the next months.

He referred to “near-term uncertainties” regarding the economic prospects, highlighting the effects of the furlough program ending and energy prices.

The Bank took a more pessimistic tone than usual about UK plc’s prospects, downgrading growth estimates for this and next years to 7% from 7.25 %, and to 6% from 5%.

Today, Halifax put average house prices at around £20,000 higher than a separate index run by Nationwide Building Society, with studies using different methods to track average prices.

Earlier this week, Nationwide said that the average UK house price had hit a new record for its index of £250,311.

Andrew Bailey (seen yesterday) said he was 'very sorry' about rising inflation, which would 'bite into' household incomes

Andrew Bailey (seen yesterday), said he was sorry about rising inflation, which would “bite into” household incomes 

According to Halifax’s index Wales continues to be the UK’s strongest performer with 12.9% annual house price inflation.

Russell Galley is the managing director of Halifax. He stated that prices have risen for the fourth straight month and that the annual rate of inflation now stands at 8.1%. This level is the highest since June.

‘One of key drivers of activity on the housing market in the past 18 months was the race for space. Buyers seeking larger properties are often farther from urban centres.

‘Combined with temporary measures such as the cut to stamp duty, this has helped push the average property price up to an all-time high of £270,027.

‘Since April 2020, the first full month of lockdown, the value of the average property has soared by £31,516 (13.2%).’

He said that parents who have made deposits for their children have helped them get a mortgage. In recent months, low borrowing costs have contributed to price growth.

Mr Bailey said: 'It is possible that some of what we've seen with gas prices is already climate change having effect if there's a switch out of coal'

Mr Bailey said: ‘It is possible that some of what we’ve seen with gas prices is already climate change having effect if there’s a switch out of coal’

Galley stated that the annual house price inflation for first-time buyers (9.2%) has reached a five-month high and has pushed ahead 8.1 % for home movers.

“More generally, the economic performance continues to provide a benign background for housing market activity. Through the end of furlough the labour market has exceeded expectations. The number of vacancies is high and growing relative to the number of unemployed.

“With the Bank of England expecting to respond to building inflation risks by raising rates within the next month and further such rises forecast over the next twelve months, we expect house buying demand will cool in the months ahead while borrowing costs rise.

“That being said, borrowing costs are still low by historical standards. Consequently, many will continue to face difficulties in raising a deposit. The limited supply of properties on the market may also help to temper the impact on property prices.