The Bank of England is “extremely cautious” observing the trends in the prices of goods and services, looking for signs that UK inflation rate will rise Governor Andrew Bailey said on Tuesday that its exchange rate has always been higher than the central bank’s target.
He told Parliament that the Bank of England’s Monetary Policy Committee would not tolerate inflation that continued to exceed its 2% target-hinting that interest rates might be raised in this case-but he said he could hardly see any signs of this. Is happening.
Before Bailey commented on the Economic Affairs Committee of the House of Lords, the UK will release the latest inflation data on Wednesday. Economists expect the figure to rise from 0.7% in March to 1.5% in April.
Bank of England officials said that this increase is predictable because in the past year, due to the coronavirus pandemic, petrol and energy prices are extremely low, and interest rates have been artificially lowered, which mainly reflects the return of interest rates to normal.
Bailey said: “Our current forecast is that we do expect inflation to rise because energy prices have seen “strong changes”, but he expects any overshoot of the 2% target set by the Bank of England. It is temporary.
This The Bank of England expects inflation to rise It reached 2.5% by the end of this year, but then fell back to the target.
Bailey said: “We have seen a rebound in the economy, but we simply cannot see this momentum continuing to move forward.” He was referring to expectations for high economic growth this year. “This year’s fiscal policy is very supportive, but in fact it will start to tail off next year.”
Regarding media reports about the soaring cost of raw materials, Bailey expressed doubts that the Monetary Policy Committee will need to see evidence, but there is currently no indication that inflationary pressures may be embedded in workers’ wage demands or continued high prices.
He added: “We did hear the story about input prices, but we have not yet seen strong evidence that it can be passed on to consumer prices.” “I can assure you that we will observe this very carefully. , We will take action when we deem it appropriate, there is no doubt about it.”
In the process of investigating the Bank of England’s quantitative easing program, Bailey spoke on the Lords Committee. Under this plan, the central bank created currency to buy government bonds and investigated the impact on the economy.
Bailey stated that he believes that quantitative easing will be effective in supporting the economy during the Covid-19 pandemic, but the plan is “more effective” during periods of financial distress, such as last March, when the plan eased new developments in the company’s credit supply. problem. .
with Andy Haldane, Chief Economist of the Bank of England Bailey said that he voted at the most recent MPC meeting to control the latest round of quantitative easing at 100 billion pounds instead of the 150 billion pounds planned to be completed before the end of 2021. After proposing various figures through the Bank of England’s “assessment process”, Bailey chose the higher amount in November last year. “The impact on the economy.
Although some lawmakers asked the central bank to assess the economic impact of quantitative easing, the central bank has not yet announced the results of this work.
