Esmond Birnie: Northern Ireland is suffering a triple inflationary blow

This represents a major breach of the Bank of England’s ‘target’ of 2%.

Major drivers of this change were diesel and petrol prices, energy costs and meals bought outside the home.

There are many reasons why this resurgence of inflation is of concern:

Given several decades during which inflation rates have usually been low it is all too easy to be complacent. If we allow the creeping up to continue there will come the point when we no longer have the inflationary tiger by the tail.

In 2020 extraordinary times required extraordinary measures but the point is coming when the previously massive levels of government spending plus money creation through Quantitative Easing will have to be put into reverse gear.

At the global level the Biden Administration plans to inject $Trillions of extra spending into the US economy do look excessive and worrying.

Higher inflation matters because it cuts into living standards.

We’ve seen reports that over the last few decades the prices of some cars have grown by about five times the growth of wages.

Higher inflation puts mounting pressure on to raise hitherto rock bottom interest rates.

Once interest rates start to rise so do the costs of servicing government debt, the latter now at high level.

The Bank of England Monetary Policy Committee in recent monthly meetings have expressed extreme reluctance to push up rates but it will probably come to that in the next few months.

The Northern Ireland economy in particular is experiencing a triple inflationary blow: UK wide price pressures, global supply constraints and then whatever Protocol related business costs are being passed on to customers.

• Note: Back in the early 1970s the notable Anglo-Austrian economist (Nobel Prize Winner) Friedrich von Hayek warned inflation constituted a “a tiger by the tail” — as he described it, so-called Keynesian government policies which had attempted to keep unemployment at a very low level by holding demand at a high level had allowed the inflation tiger to get out of its cage. And putting it back in that cage would prove very costly. This was confirmed by the experience of the 1970s and 1980s.

• Dr Esmond Birnie is senior economist at Ulster University Business School and senior research fellow at Pivotal NI Policy Forum

• Other comment pieces below, and beneath that information on how to subscribe to the News Letter

• Rise in exports from Northern Ireland to the Republic not as big as claimed

• Ruth Dudley Edwards Nov 9: A draining Sunday along the border, then at Lyra film

• Henry McDonald Nov 15: NHS workers should be required to have Covid vaccines

• Ben Lowry Nov 13: Essays in 2010 about NI on its 2021 centenary foresaw province staying in UK but not change from within

• Owen Polley Nov 13: Woke theories on history, gender and race get ‘stormy applause’

• Peter Robinson Nov 12: Opinion polls matter, if questions are well-defined

• Patrick Roche Nov 11: Archbishop’s comments a moral indictment of unionism

• Esmond Birnie Nov 10: Increasing interest rate now could lessen pain down the line

• Kenny Donaldson Nov 9: Amnesty admission makes mockery of Irish legacy criticism of Britain

• Writers Oct 30: We probe Irish nationalist myths in our new book which defends the Union

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