The chief economist at the Bank of England, Huw Pill, said policymakers would sacrifice growth to control inflation in the UK, saying there was a risk that rising prices could have a “self-fulfilling prophecy” dynamic. Bloomberg.
Speaking at an online event on Tuesday, Pill said further monetary policy would need to be tightened in the coming months, with the UK central bank ready to act “more aggressively”.
The BoE official’s comments suggest that tightening monetary policy could lead to a recession as central banks struggle to cope with the effects of rising energy and food prices. Pill said the BoE’s tools could curb inflation and put it back on target, but could not address issues of widening the gap between rich and poor or weakening the pound sterling.
The BoE last week proceeded to the fifth consecutive increase in interest rates, while estimating that the average inflation for 2022 in the UK. will be set at 11%. The key interest rate was set at 1.25%, with an increase of 25 basis points, however, the Bank clarified that it can move more aggressively afterwards, even with increases of 50 basis points.
Criteria for stronger moves, Pill said, would be to make it clear that inflation is embedded in wages or to make it generally believed that prices will continue to rise.
Source: Capital
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