Bank of England chief warns it will ‘have to act’ to curb inflation

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The Bank of England governor warned on Sunday that he would “have to take action” to curb inflationary pressures, without making any attempt to contradict the financial market moves that set the first rate hike before the end of the year.

Speaking from home to the G30 central bankers group, Andrew Bailey said UK inflation has already picked up and will rise further in ways that will call for action to tame inflation in the medium term.

Stepping up his speech ahead of the budget and the next BoE forecast on November 4, he indicated that his concerns about inflation during the current energy crisis had heightened.

The governor stuck to his firm view that the rise in inflation, which jumped to 3.2 per cent in August, would eventually be “temporary” but noted that significant price increases would continue into next year.

Energy story means [the period of high inflation] It will last longer.

While he said the Bank of England could do nothing about the initial increases in energy and commodity prices hit by the supply chain disruption, the rate-setting Monetary Policy Committee was increasingly concerned about price hikes raising “medium-term inflation and inflation expectations.” in the medium term.”

“That’s why we signaled at the Bank of England, another such signal, that we’re going to have to act,” Bailey said. “But this action, of course, comes in monetary policy meetings,” he added.

Less than a month ago, financial market participants expected the first rate hike from the bank not to come before the summer of 2022, but higher prices and increased rhetorical output from the central bank pushed this date forward.

The majority of people who trade in the overnight index swap market, which predicts the Bank of England’s interest rate, expect the first rise from 0.1 per cent to 0.25 per cent at this year’s December meeting.

Few think the BoE will act early in the November meeting as most committee members said they want to wait until there is good evidence of the impact of ending the holiday plan before taking any action.

New UK inflation figures will be published on Wednesday, with economists expecting the September rate to remain at 3.2 per cent before rising sharply to over 4 per cent at the end of the year.

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Bailey said one of the main reasons for high inflation is that consumers are still demanding goods rather than switching to spending money on services, and this rise in demand combined with supply chain problems has driven up prices.

He added that these changes in consumption patterns coincided with a decrease in the number of people willing and able to work because young people were continuing their education at the same time as the retirement rate was rising.

“I have concerns about the growth of the labor supply,” he said.

But he added that he did not think the “general pattern of labor market pressure” was so far visible in the UK economy.

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