BoE MPC member Michael Saunders said in a speech, “I put considerable weight on risks that, unless checked by monetary policy, domestic capacity and inflation pressures would probably be greater and more persistent than the central forecast.”
“As a result, my preference has been to move relatively quickly to a more neutral monetary policy stance,” he added.
“The strength of external costs is eroding real incomes and is likely to cap real spending,” he explained. “But, by creating a long period of above-target inflation, these external cost increases also may exacerbate the rise in inflation expectations and hence, with the tight labour market, could make it harder to ensure domestic inflation pressures return to a target-consistent pace.”
