High-flyer Kate Barker admits that, like everyone else, she tries to be a savvy shopper in today's tough times. The Monetary Policy Committee member, who met business movers and shakers in Lincolnshire, would not be drawn on how interest rates might impact on the retail market over the coming months. But she did acknowledge 'enormous pressures' in the economy
On the inflation front, she is certain that Bank of England governor Mervyn King will be firing off more explanatory letters to Chancellor Alistair Darling.
Ms Barker spoke to thisisbusiness after meeting bosses from a variety of sectors over breakfast at the Lindum Group's North Hykeham headquarters.
"I attend about eight meetings a year countrywide," she said. "There's nothing like getting grassroots feedback. It's really important when people are less than happy with what is happening in the economy.
"At some periods, it has been pretty quiet and steady. Now that's absolutely not the case. Different sectors are suffering different pressures - the construction industry, in particular, and housing are under enormous pressure."
Firms exporting to Europe are doing well. The big question is how far they can contain soaring costs, said Ms Barker.
"The thing that has stood out for me is just how strong some firms' cost pressures are, coming from food, oil and other commodities. We know this because producer prices are so strong."
In May, inflation hit 3.3 per cent. Mr King said it could easily top four per cent and has been reported as saying people will have to live with high inflation.
"I was supportive of Mr King's recent letter to the Government. I think the point that he was making, and it's not a welcome one, is that because of rises in import prices, it is not really possible for people to maintain the rises in living standards that we are used to.
"We are now importing things that are more expensive, whereas most of the time I've been on the MPC (since 2001) people have enjoyed very good rises in living standards, because imported goods have been getting cheaper."
Ms Barker said that people may be unhappy that the future is not going to be as good as the past few years, but the Bank of England is clear that if they try to claw money back in wages, inflation would rise to a worrying degree.
Some people claim that the Consumer Prices Index measure used in relation to inflation does not reflect the true cost of living compared to, say the RPIX, used by the bank until 2003. Ms Barker does not feel the difference is that great.
Lindum Group finance director Herman Kok said: "Clearly there are tough times ahead. The breakfast meeting proved that you can have a say in what happens."
The view from Lincolnshire bosses
Lincat Ltd managing director Steve Mitchell said: "We spend a lot of money on stainless and non-stainless steel. Due to our large volume purchasing we are able to fix base prices for stainless steel for 12 months.
"However, the actual market price has moved up 45 per cent since the contract for 2008 was agreed. This inflation will hit us when negotiations start for 2009.
"Iron ore prices have gone up 65 per cent in 2008. The cost of oil and transport has increased by 30 per cent. The price of copper - nearly 9000 per tonne compared to 5000 in 2007 - affects the prices of all electrical components we buy."
Lincoln College principal John Allen said: "Ms Barker was given a fairly gloomy picture for the house building sector, which has implications for the college, due to our significant investment in construction training. We also talked about the level of wage demands. We are in the public sector and starting discussions soon on what we can afford to pay."
Source: Lincolnshire Echo
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