Markets behave as if the UK inflation process has changed. The data suggest it has not. Britain has been hit by one shock after another since 2020 — pandemic supply disruptions, the energy crisis after Russia’s invasion of Ukraine, the gilt market episode under Truss, and now renewed pressure from the Middle East. Each has tested the system in a different way. But the underlying inflation process appears largely unchanged. That matters now. Inflation has been slow to fall, and the MPC is caught between a weakening labour market and a renewed energy shock that could push inflation back above 3.5%. The usual playbook — ... (full story)