Though many of the so-called “base effects” will recede, more nasties are lurking in the months ahead as millions of households face rising energy prices this autumn. As Nomura’s George Buckley says: “Sharply rising gas and electricity prices present further sizeable upside risks to inflation forecasts in the coming months.”

Against this backdrop, the key question for the Bank is: how transitory is transitory? Hawkish MPC member Michael Saunders has already seen enough warning signs to vote for an early end to the Bank’s latest tranche of QE. 

Gerard Lyons, a former candidate to lead the Bank, adds that an era of relatively low inflation since the Nineties is potentially giving way to a less globalised post-Covid reality of rising price pressures and more influential trade unions.

“The contributing factors to low inflation were intense global competition because of globalisation, technological change, that wages have tended to be squeezed lower and the wage share remained low,” he says. 

“Some of those features could change as a result of this pandemic. In addition, we clearly have supply bottlenecks and some other factors, which may be temporary, but may be enough to lead to higher cost pressures, rising wage pressures, rising commodity prices as well.”

Another major uncertainty amid the “transitory” debate is what happens when the furlough scheme wraps up at the end of the month, bringing an end to 18 months of government-supported wages. The effects of this will not be seen in official data until the end of the year.