BoE Monetary Policy Committee member Silvana Tenreyro, known for her dovish stance, has expressed her belief that interest rates have already been raised more than enough.
Tenreyro stated, “the shape of the inflationary shock stemming mostly from the large increase in energy prices, coupled with the long lags with which monetary policy affects the economy, means that the most likely scenario now is that we undershoot the inflation target in the medium term, meaning 2025.”
She emphasized the need for forward-looking forecasts when setting policy, and warned that “we may already have tightened too much” based on UK forecasts.
She likened those advocating for further rate hikes to Milton Friedman’s “fool in the shower,” explaining, “When the fool starts the water and it runs cold, he keeps turning the faucet and, eventually, because he’s impatient, he gets burned.”
