BoE MPC member Michael Saunders reiterated in a speech, “The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.”

He added that these guidance conditions “have now been met”. There is “clear evidence” that GDP has “regained most of the lost ground in recent months”. Spare capacity in the labor market is “declining”. And the economy “continues to grow rapidly”. GDP is likely to regain pre-pandemic peak in the “next few months”.

Also, there is “clear evidence” that core inflation is “no longer below a target-consistent pace”, and it’s “likely to rise further in coming months”. This back drop meets the test of “significant progress in eliminating spare capacity and achieving the 2% inflation target sustainably.”

Even though the phrase “at least until” indicates these conditions are necessary but not sufficient for tightening. He said, “the guidance no longer rules out tightening.” Also, “the question of whether to curtail our current asset purchase program early will be under consideration at our forthcoming meetings”.

Full speech here.

BoE Governor Andrew Bailey admitted in an interview that yesterday’s inflation numbers were “higher than we thought it would be”. But the central bank won’t be rushed in to raising interest rates.

“What we will have to do, again, is go through all the evidence and assess to what extent we think the sorts of things that underlie that are likely to be transitory,” he added. “And to what extent is it going to cause second round effects – so it starts to get embedded in expectations and it gets into wage negotiations and it’s difficult to get out (of an inflationary cycle).”

In reaction to people who said that BoE is being “casual” about the surge in inflation, he emphasized, “we’re not at all actually.” “The committee has been very clear – if we think the case is made, then of course, we will respond and use the policy tools. We must do that.”

BoE Deputy Governor Jon Cunliffe told CNBC, “one shouldn’t expect the reopening of the economy to be smooth, this is not something that you can just close down and reopen without bumps in the way.” He admitted, “we’re seeing a surge in demand. We’re seeing some constrictions in supply that’s driving inflation.”

“Are these factors that the economy will then adjust, supply will recover and adjust, and demand after the initial burst will cool off, or is this something more persistent that will become embedded in people’s expectations?” he questioned. But he emphasized that BoC will try to analyze the situation as the economy returns tor normal.