BoE’s Bailey Says Fear Of Inflation ‘High For Longer’ – Paper | Invest News

LONDON (Reuters) – Bank of England Governor Andrew Bailey said his concern about the inflation outlook was that it could be “high for longer”, but it is also possible that inflation may not proves not as persistent as feared.

Earlier this month, BoE forecast inflation would hit around 5% in the second quarter of next year, more than double its official target, amid soaring energy prices and bottlenecks of strangulation as the world emerges from the COVID-19 pandemic.

“You are in a rather hectic world … [the inflation picture] is a two-way street, ”he said in an interview with the Sunday Times.

“There are risks both ways. Obviously our concern would be that if there were any second round effects it could be high for longer.”

The second round effects of which Bailey is particularly concerned are wage negotiations and the labor market.

“If the economy evolves as the forecasts and reports suggest, we will have to raise rates. Which, by the way, is very consistent with what I said in October,” he said. declared.

The governor said this week that he was very worried about the outlook for inflation and that his vote to keep interest rates on hold on November 4 had been very tight.

The BoE caught many investors off guard when it failed to raise interest rates to their all-time low of 0.1%, following Bailey’s comments in late October, which markets interpreted as a signal that a rate hike was very near.

Inflation has since hit a 10-year high at 4.2% and unemployment data does not point to an increase in unemployment after the leave scheme ends – a key concern that has held the hand of the BoE at the start of this month.

More unemployment data will be released ahead of the next BoE meeting on December 16.

BoE chief economist Huw Pill said on Friday that the weight of evidence was shifting to an interest rate hike next month, but that he had not made a decision and the markets better focus on the long term.

(Reporting by James Davey; Editing by Christina Fincher)

Copyright 2021 Thomson Reuters.

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