The UK was headed towards a serious inflationary spike long before the Russians invaded and destroyed much of Ukraine. Food, energy and other commodity prices were already rising at a worrying pace, and in the UK a swift rebound from the pandemic was causing serious disruptions to supply chains and shortages of labour and materials. The hospitality sector provides a prime example, with many pubs and restaurants still with restricted opening schedules due to staff shortages, and pay rises of 10% or more needed to retain or attract employees. Now we have the war in Ukraine, a country that grows 10% of world wheat exports and 54% of the world’s sunflower-seed production, in a death clinch with a country that delivers over 40% of Europe’s supplies of gas. And the UK’s Monetary Policy Committee still believes that this is a short-term inflation spike – a hiatus that will settle back when inflation becomes its own self-righting mechanism. By this they mean that as our money buys less and we feel poorer, we will consume less, supply problems will disappear and inflation returns to 2%.

There are three core reasons why the MPC has got this wrong and why UK inflation is here to stay.