Bank of England policymakers say Omicron can keep inflation high for longer

The emergence of Omicron coronavirus variants may mean Inflation rate remains high If it prevents consumers from shifting their spending from goods to services and extend Disruption of the global supply chain, According to policymakers at the Bank of England.

Catherine Mann joined the Bank of England Monetary Policy Committee in September and has been one of its more moderate voices so far and left with a majority vote. Interest rates remain the same Despite the soaring inflation, it was still 0.1% in November.

But her comments at an event hosted by Barclays Bank on Tuesday indicated that she shares some of the concerns of other Monetary Policy Committee members that if the central bank fails to tighten policy, inflation may remain longer than previously expected. Above the Bank of England’s 2% target.

As inflation reached its highest level in nearly a decade, the consumer price index rose 4.2% in October from a year earlier.

Man said that with Omron Information It has only just begun, and any interest rate hike “is too early to even talk about the timing”, let alone the scale of the Bank of England’s first action.

She added that the arrival of the new version may damage consumer confidence and lead to weak demand. Decision makers need to check a series of incoming data before deciding whether to take action.

But Mann also emphasized the risk that Omicron may cause global supply chain pressure to last longer than expected, so the commodity price surge recorded in recent months may not fade as early as the Bank of England’s November forecast assumed.

Her warning echoed comments from Federal Reserve Governor Jay Powell. Tell the legislator On Tuesday, the rising number of Covid-19 cases and the new Omicron variant may put the economic recovery at risk and increase the uncertainty surrounding inflation. Nevertheless, he expressed support for a faster exit from the Fed’s large-scale asset purchase program.

Mann said that if China and other countries pursuing a zero-Covid strategy close manufacturing plants due to the discovery of Omicron cases, causing the “bullwhip effect” to spread to the global supply chain, price pressures may be more persistent.

In addition, if the new risks surrounding the virus make consumers reluctant to go out, consumers may continue to spend money on goods rather than services.

Mann said: “We expect that the rotation away from commodities will become a factor in the slowdown in commodity price inflation we are seeing today.” “If Omicron basically lets us go back to our house… we may not have seen it. at this point.”

Mann also pointed out several factors that may cause inflation to fall from its current high next year, including the weakening of the impact of the US economic stimulus on global demand and the decline in freight rates.

But she also said that the UK labor market is “tight and is expected to remain in this state”, and policymakers “are very aware of the prospect of a tight labor market transforming into wage inflation”.

Other members of the Monetary Policy Committee, including Huw Pill, chief economist at the Bank of England, said More clear The current conditions can prove that the vote to raise interest rates is reasonable, but has been careful not to give any indication that the first step is in December, as the market expected, or later.

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