The one thing that could drive UK interest rates higher – MoneyWeek

Andclosertohomethereareworryingindicatorsthatenergycostscouldbeabouttospiral。

EnergygiantScottishPowerhikeditsgaschargesasurprising19%,andotherutilitiesarelikelytofollow。

CriticsofKingspolicyarguethataraterisewouldstrengthenthepoundandeasesomeofthisimportedinflation。

YetKingrepeatedlyinsiststhatthefactorsbehindtheUKinflationaretransitory。

Hebelievesitwillriseto5%beforefallingto2%by2013。

Thisstance,andhisapparentdisregardforhittingtheinflationtargetanytimesoon,hascausedsomecommentatorstoquestiontheBankscredibility。

ButthatsunlikelytocauseKinganysleeplessnights?

Whatwouldworryhimhowever,isifwagesstartedtorise。

Atthemoment,themainimpactofinflationisthattheaveragepersonsstandardoflivingisfalling。

Inthelongrun,thismakestheUKmorecompetitiveonaglobalbasis,butitsnotverypleasant。

Iftheeconomygenuinelycomesupagainstshortagesofworkers,thenwagescouldstarttopickupsharply。

Ifthathappens,theBankwouldhavetoraiseratestoavertawage-pricespiral。

Sofar,wagepricegrowthisstillbehavingitself。

AndeconomistshaveputbackthelikelydateofthenextraterisetoNovember。

Butyoushouldbekeepinganeyeoutforwarningsigns,byfollowingourkeyinflationindicators。

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