UK inflation jump seen as temporary, but risks to debt are growing-OBR

A woman in a protective mask is seen at Andreas Grocery store after it received a delivery of fresh fruit and vegetables, as the spread of the coronavirus disease (COVID-19) continues, in London, Britain, March 20, 2020. REUTERS/Dylan Martinez

LONDON (Reuters) – Britain’s recent increase in inflation is expected to be temporary but the country’s 2 trillion-pound debt mountain is becoming more exposed to inflation shocks, Richard Hughes, chairman of the Office for Budget Responsibility said.

“Our own forecast expects that the inflation increase that we see to be a temporary phenomenon driven by an adjustment to the economy back to its normal levels of activity, and we don’t expect that to persist over the long term,” Hughes told BBC radio on Tuesday.

But the government’s debt stock was increasingly exposed to the risk of higher inflation and interest rates, standing at 100% of gross domestic product with shorter average maturities and more inflation-linked bonds, he said.

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