BoE: inflation could trigger global selloff, harm UK

The Bank of England has warned that rising inflation could trigger a selloff in global financial markets, with a damaging impact on the UK economy.

BoE expects inflation will rise above 4% this winter, and will remain elevated until at least the summer of 2022 before gradually falling back towards its target rate of 2%.

Fears have also been raised over high levels of corporate debt, including in China at the crisis of Evergrande, where concerns over its ability to keep up with debt payments have grown through global markets.

In its regular financial health check, the Bank’s financial policy committee said risky asset prices in several markets had risen to historically high levels and could be primed for a sharp fall amid rapid growth in inflation.

Economists warned that a sharp selloff in financial markets could lead to tighter financial conditions, pushing up borrowing costs for businesses and consumers.