BoE Deputy Governor Ben Broadbent reiterated in a speech that “it takes time for policy to work”. “A change in interest rates has its peak impact on inflation only after a significant delay – probably eighteen months or more”.
When global central bankers used the word “transitory” in describing current surge in inflation, “they do not mean (and never meant) that these effects will be gone in one, two or even twelve months”.
“The relevant question is whether the global factors currently pushing up on goods prices are still there by the time a policy decision taken today could have any significant effect of its own,” he added.
“What is their prospective contribution to inflation in eighteen, twenty-four months and beyond? This is the horizon that matters for policy and against which the word ‘transitory’ should be measured.”
