The latest figures show that prices in the UK have risen 3.2% in the past 12 months.
Andrew Bailey explained to a panel of central bank governors that the bank would have to “act on inflation” but did not indicate when it could raise interest rates, which currently stand at 0.1%.
He explained that UK inflation is on track to surpass 4% (more than double its target) before dropping to pre-COVID levels. Higher energy prices will drive inflation longer than initially calculated. His comments give a clear indication that a rate hike is imminent. They will, then, be the first major banks to decide whether to increase interest rates.
Bailey said he believes this rise in inflation will be temporary, fueled by higher energy prices. “Monetary policy cannot solve problems on the supply side, but it will have to act and it must act if we see risks, especially for medium-term inflation and the medium-term inflation outlook,” Bailey said. It’s in the Bank of England and that’s one of those signs that we need to act.” “But of course that decision is made in our monetary policy meetings.”
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