It’s time for another edition of “Inflation? What Inflation?” Two stories from the WSJ today:
- U.K. Says Higher Rates Would Take Heavy Toll:
New data showed the United Kingdom’s annual inflation rate jumped to 3.3% in May, and Bank of England Gov. Mervyn King set a two-year timeframe to nudge the rate to the central bank’s 2% target.
Data showed the annual rate of inflation rose to 3.3% in May — its highest level since 1992 — from 3% in April. Mr. King said the rate is expected to move above 4% in the second half of this year and remain “markedly above” the 2% target well into 2009.
When the inflation rate is above 3%, the central bank governor is required to write a letter to the government explaining why prices are rising and what the bank intends to do about it.
- Fed Faces Dilemma as Costs Soar, Activity Slows:
Data released by the Labor Department on Tuesday show companies are facing rising costs for an array of supplies, which may prompt them to increase prices on their products in the months ahead. The producer-price index rose 1.4% in May from the month before, partly reflecting a surge in crude-oil prices that pushed gasoline prices up 9.3%. Prices for other commodities also jumped.
The index for core prices, which excludes energy and food, rose by a more muted 0.2% in May from the month before, but was up 3% from a year earlier, the biggest jump on a yearly basis since 1991.
It is time to restrain monetary growth on a global scale.