In an odd moment of truthful admission – that absolutely will not be heard in the US – The Bank of England governor has said he is “very sorry” that UK inflation is rising amid forecasts the cost of living could increase as much as 5%.Andrew Bailey told the BBC that households were already feeling the impact of rising prices.

“I’m very sorry that’s happening,” he said.“None of us want to see that happen.”

Inflation is currently ahead of the Bank of England’s 2% target at 3.1%. There are expectations it could rise to 5% by next April.Mr Bailey said:

“Inflation is clearly something that bites on people’s household income. I’m sure they’re already feeling that in terms of prices that are going up.”

While real wages soared during the pandemic as supply of free-money dominated the suppressed-demand for goods/services – all thanks to government intervention – that is all unwinding now and real wage gains are rapidly slowing…Source: BloombergThis has helped push UK’s “Misery Index” to its highest in a decade…Source: BloombergAnd arguably things are about to get far more serious as the choice between heating your home and feeding your family is a real one for many BritsAlong those lines, commenting on the decision not to raise borrowing costs this month. Mr Bailey said:

“Putting interest rates up, I’m afraid, isn’t going to get us more gas.”

Finally, Danny Blanchflower, a former member of the MPC who is now an economics professor at Dartmouth College in the US, warned that trusting what The Bank says may be a mistake:“We have no historical precedent for what’s happened,” he said.”We’ve never seen a shock of this kind and the big thing we are seeing at the moment is the furlough scheme is coming off, there is going to be an increase in taxes on National Insurance [and] universal credit was just cut.“So, the central bank really hasn’t a lot of clue what is going on.”He concluded rather ominously: “This is a really big uncertain world and everybody should tread cautiously. I’m afraid I have to say… you have to take what the governor of the Bank of England and the Monetary Policy Committee said with a very large pinch of salt.”