A near half-century low in unemployment would usually be good news for a central bank, but the latest fall in the UK’s jobless rate will make the Bank of England’s task of taming inflation even more difficult.
With inflation expected to exceed 9 per cent for April in official data to be released on Wednesday, the BoE Monetary Policy Committee has signalled it is ready to engineer job losses and a weaker economy through interest rate rises so as to bring price increases under control.
Stagflation is on the cards for much of the developed world in 2022, but the UK is especially exposed to a combination of persistently high inflation and low economic growth. Britain is contending with the same shock to energy prices as other European countries, but it also has a labour market more like that of the US, with widespread worker shortages fuelling wage pressures.