M&G's Riddell on record jump in UK inflation

INFLATION WILL CAUSE MASS HYSTERIA

A 1% jump in UK CPI in December meant that the year on year inflation rate in the UK soared from 3.3% to 3.7% year on year, once again beating consensus expectations of 3.4%.

No doubt we will have the newspapers tomorrow full of talk of a return to the 1970s, and no doubt we'll also have various MPC members continuing to come out over the next few weeks and months explaining that this inflation problem is (still) temporary. The bond market is taking the inflation number seriously, and is now pricing in almost 3 lots of 0.25% rate hikes by the end of this year. The first rate hike is now fully priced in for June. Also, while the MPC has done a bad job inflation forecasting over the past few years, it still definitely has a point. If you measure inflation ...