Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Bank of England will have to act to contain inflation - Bailey

Published 17/10/2021, 15:18
Updated 17/10/2021, 16:00
© Reuters. FILE PHOTO: Bank of England Governor Andrew Bailey poses for a photograph on the first day of his new role at the Central Bank in London, Britain March 16, 2020. Tolga Akmen/Pool via REUTERS

© Reuters. FILE PHOTO: Bank of England Governor Andrew Bailey poses for a photograph on the first day of his new role at the Central Bank in London, Britain March 16, 2020. Tolga Akmen/Pool via REUTERS

LONDON (Reuters) -Bank of England Governor Andrew Bailey sent a fresh signal on Sunday that the British central bank is gearing up to raise interest rates for the first time since the onset of the coronavirus crisis as inflation risks mount.

Bailey said he continued to believe that the recent jump in inflation would be temporary, but that a surge in energy prices would push it higher and make its climb last longer, raising the risk of higher inflation expectations.

"Monetary policy cannot solve supply-side problems - but it will have to act and must do so if we see a risk, particularly to medium-term inflation and to medium-term inflation expectations," Bailey said during an online panel discussion organised by the Group of 30 consultative group.

"And that's why we at the Bank of England have signalled, and this is another such signal, that we will have to act," he said. "But of course that action comes in our monetary policy meetings."

The BoE has forecast that Britain's inflation rate will go over 4%, more than double its target, as the world economy reopens from its COVID-19 lockdowns, causing shortages of supplies and staff, and the price of energy soars.

Investors are speculating that the BoE might become the first of the world's biggest central banks to raise rates, later this year or early in 2022.

Bailey said demand for workers in Britain had been stronger than expected and the number of younger and older workers leaving the labour market had grown.

"I do have concerns about labour supply growth," he said.

But Bailey said he did not believe there was a "general pattern of labour market pressure" as wages climbed strongly in some sectors but less so in others.

© Reuters. FILE PHOTO: Bank of England Governor Andrew Bailey poses for a photograph on the first day of his new role at the Central Bank in London, Britain March 16, 2020. Tolga Akmen/Pool via REUTERS

He also said there were lessons for governments seeking to prevent future supply chain shocks in the way financial regulators had responded to the shock of the global financial crisis of 2007-09, including regular stress tests.

"I'm not saying we have the magic answer to supply chains across the board, but I think there are lessons that we have learned in terms of resilience that can usefully be adapted and used and translated into some other markets, particularly for instance when I look at energy supply," he said.

Latest comments

Governments across EU and most definitely the UK have been keeping rates artificially low since 2008/9. More worrying is Debt levels here in the UK which are a ticking time bomb as we continue to live beyond our means as UK plc
imagine 5% base rate...
October '89 it was 15% so 5% is very easy to imagine
Just a natural progression for Boris's high wage economy. Higher Wages = Higher Prices = Inflation = Higher Interest Rates = Stronger Pound = Less Exports. Rinse and repeat until you reach recession.In Boris's magic beans economy everyone will earn Stg£60k, what could possibly go wrong.
this will lead to WEAKER pound not stronger. If you don't increase the GDP but raise value of everything artificially the currency will be devalued vs its peers. This leads to higher unemployment as firms will delocalise their Jobs to India or elsewhere where wages are lower.
The only inflation to be controlled by interest rate rises should be demand led inflation … runaway demand is not the issue here.Wage inflation has been called upon re min/living wage increases so additional inflation is a given for the time being.Cant imagine the fallout for those with mortgages … so low for so long … will be devastating for so many
yep low mortgages have helped who...
If there is not enough supply to meet demand then it becomes a demand issue. As they said they cannot increase supply therefore they have to reduce demand. Interest rates have been artificially low for 14 years.
this can effect on gold any idea?
we might see gbp going to the moon gbpjpy will buy over 500pips in just a short time
GBPUSD can be bullish market..
The problem is real inflation which is much higher than the CPI. Real inflation is what the UK people have to deal with and suffer from in the real economy. CPI is the figure the UK government uses to hide inflation so that the BoE can debase the currency to keep the housing bubble going and monetise reckless government spending.
Well summed up
very good sir
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.