Brexit has made inflation harder to control in Britain and left the country exposed to “self-sustaining” price rises, according to the Bank of England’s chief economist, Huw Pill.
In remarks that will resonate with the small and medium-sized firms still wrestling with stubborn cost pressures, Pill said policymakers had found it tougher to rein in the pace of price rises since the 2016 vote to leave the European Union.
Speaking at a conference in Uzbekistan, Pill argued that the structural overhaul of Britain’s labour and goods markets brought about by Brexit had reshaped the economy in ways the Bank was “still learning about” and “still digesting”.
“My own view is that those changes have led us to a structure which is more prone to this sort of self-sustaining momentum in pricing, which can lead to greater inflation persistence,” he said.
Pill pointed to two forces in particular: the new trade barriers thrown up between Britain and its largest trading partner, and the end of the free movement of workers, which has drained the pool of available labour in sectors that long leaned on European staff.
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