The IMF is ominously complacent about the threat of inflation –

These pressures are expected to subside by the end of next year. Support for this view comes not just from the world’s major central banks, but from two of Wall Street’s finest: Goldman Sachs and JP Morgan have both recently told their clients that fears of prolonged inflation are overdone.

That’s not, however, what the markets seem to think. Inflation in the UK is already being priced to average 3pc on average over the next decade, considerably higher than the Bank’s 2pc target. 

Since the beginning of September, moreover, the yield on the 10-year UK gilt has risen all the way from 0.6pc to nearly 1.2pc. Rising inflation and interest rates add precipitously to the Government’s debt servicing costs, eating deep into any scope it might have for spending increases and/or tax cuts.

Again, what’s happening in the labour market is in most respects a very welcome development. Payroll employment is already 0.4pc higher than immediately before the pandemic, staff vacancies are at a record 1.2m, and wages are beginning to rise strongly. 

Stripping out base and composition effects from the pandemic, the Office for National Statistics estimates that underlying average pay rose by between 4.1pc and 5.6pc in the three months to the end of August. Real time data, moreover, suggests that earnings have continued to surge since then, with median monthly pay 7.5pc higher in September than just before the pandemic. 

As I say, nobody would have predicted that in the depths of lockdown. Some sectors are already close to double-digit pay rises. In the professional, scientific and technical sectors, for instance, average monthly pay in September was a stonking 9.4pc higher than a year earlier. Employment agencies speak of those with the requisite skills being able to virtually name their price.

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