BoE MPC member Silvana Tenreyro said in a speech that since August MPC forecast, there was “large upside news for near-term inflation from energy prices” which should “fade quickly”. But there was also a “moderation in recent GDP growth”, which looks set to “continue as we enter winter months. Higher energy prices may “reduce households real incomes and depress sentiment”, with additional risks from the prevalence of Covid, and falls in income for any furloughed workers who move out of employment.
Overall, she judged that the balance of the news is “unlikely to have a large effect on the amount of tightening required over the next few years”. The August forecast was “conditioned on market expectations of a gently rising path for Bank Rate, gradually unwinding the relatively small amount of monetary policy stimulus added since the onset of Covid”. The precise policy path will partly depends on how risks evolved.
She added, “my votes on any future policy changes will depend on incoming data and my assessment of the economy at the relevant MPC meetings”.
