Choosing to keep the bank rate unchanged is not a passive choice It is a deliberate action in deciding to maintain interest rates as it is BOE does not want to lock itself in on interest rates, need to remain flexible Have stressed that we are ready to act if necessary The board…
Choosing to keep the bank rate unchanged is not a passive choice It is a deliberate action in deciding to maintain interest rates as it is BOE does not want to lock itself in on interest rates, need to remain flexible Have stressed that we are ready to act if necessary The board has varied opinions on second-round effects Pill was the lone dissenter in wanting to raise the bank rate to 4.00% but he’s not being too pushy with his case from the remarks above. They are mostly a rehash of what governor Bailey mentioned yesterday.
So, I’ll just leave this passage from Pill himself in justifying his vote to want to raise the bank rate from the day before: “Events in the Gulf have left the outlook for global energy prices elevated and more uncertain. That uncertainty is unlikely to dissipate soon, but it is nonetheless clear that higher energy prices represent an inflationary shock to the UK economy. Second-round effects in price and wage-setting stemming from this shock have the potential to raise UK inflation beyond the near term in a persistent manner.
Our scenarios illustrate how a stronger impulse to inflation may strengthen second-round effects. But I see the risk of second-round effects in each of these scenarios as skewed to the upside. I recognise that second-round effects may be more modest with a looser labour market.