BoE Deputy Governor Jon Cunliffe said said in a speech that the UK economy entered 2022 “still affected by two major impacts of the path out of Covid – very high imported inflation, and a very tight labour market with strong pay growth.”
“While I recognise the risk of second-round effects and that further tightening of monetary policy might be necessary, I am not at present convinced that we will inevitably have to lean heavily and constantly against an embedding of an inflationary psychology as we progress through this challenging period and as the impact of higher commodity prices on real household incomes depresses activity.”
“Rather, we will need carefully to judge the risks on both sides, weighing the evidence on the evolution of domestic prices, wages, activity and employment as it emerges. The MPC’s next forecast will be the first opportunity since the invasion to do that,” he added.
