Bank of England President Andrew Bailey spoke at an online panel. Bailey said authorities should look for ways to stop the inflationary forces.
Andrew Bailey, President of the Bank of England (BOE), said the central bank would “have to take action” to curb inflationary forces. He also warned that higher energy costs mean price pressures will continue and strengthened the ground for rate hikes.
Speaking at an online panel organized by the Group of 30 (an independent body of economic and financial leaders from the public and private sectors), Bailey said that central banks do not have the tools to solve supply disruptions and that he thinks the recent acceleration in inflation will still be temporary. However, he said that authorities should look for ways to prevent high inflation expectations from taking root.
Inflation Will Continue for a Longer Period of Time
Bailey said rising energy prices mean that inflation “will continue for a longer time, and as a result, of course, it will be reflected in the annual figures for a longer period. That’s why we, the Bank of England, signaled that we would have to take action. Of course, this step will be taken at our monetary policy meetings.”
These warnings are another step taken by Bailey and some of his colleagues to lay the groundwork for raising borrowing costs to curb inflation. The central bank expects inflation to break 4 percent this year.
Traders are speculating that the BOE will begin raising interest rates in the last months of 2021 and raise the benchmark rate to 1% by the end of 2022, from the current record low of 0.1%. Michael Saunders, seen as the most hawkish member of the BOE Monetary Policy Committee, said this month that signals for a rate hike could be strengthened soon.
