Bailey Says Bank of England ‘Will Have to Act’ on Inflation
Bailey Says Rising Energy Means Inflation Could Last Longer
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Bank of England Governor Andrew Bailey moved to strengthen the case for raising interest rates, saying the central bank will “have to act” to curb inflationary forces and warning higher energy costs mean price pressures will linger.
Speaking to an online panel organized by the Group of 30, Bailey said that while central banks don’t have the tools to counter supply disruptions and he still believes the recent acceleration of inflation will be temporary, officials need to seek to prevent higher inflation expectations from becoming entrenched.
Rising energy prices mean inflation “will last longer and it will of course get into the annual numbers for longer as a consequence,” he said. “That raises for central banks the fear and concern of embedded expectations. That’s why we, at the Bank of England have signaled, and this is another signal, that we will have to act. But of course that action comes in our monetary policy meetings.”
The remarks were the latest attempt by Bailey and some of his colleagues to lay the ground for an increase in U.K. borrowing costs to curb inflation, which the central bank expects to breach 4% this year, more than double its target.
Traders are betting that the BOE will start raising rates in the final months of 2021, and will take its benchmark to 1% by the end of 2022 from the current record-low of 0.1%. The MPC will hold two more policy meetings before the end of the year.
Michael Saunders, widely seen as the most hawkish member of the Monetary Policy Committee, this month appeared to reinforce signals of an imminent hike.
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