In a speech, BoE Chief Economist Huw Pill unpacked the MPC’s most recent communication about the outlook for monetary policy decisions.
The latest statement widened the discussions beyond the interest rate decision at August meeting. It reflected the “uncertainties” and “likelihood that we will have to take finely-balanced decisions over rates not just in August but also beyond that, in the face of two-sided risks to the economic outlook into next year.”
By referring to “‘any further increases in Bank Rate”, the BoE talked about rate increases, not decreases. But at the same time, the reference to “any” increases “allows for the possibility of remaining on hold”.
The focus on “indications of more persistent inflationary pressures” places emphasis on ” identifying potential second-round effects in price and wage setting behavior”. Thar prioritizes “the more persistent component of inflation developments over the headline spot measure.”
By signaling preparedness to ‘if necessary act forcefully in response’ to indications of greater persistence in inflation, the statement reflected “both my willingness to adopt a faster pace of tightening than implemented thus far in this tightening cycle”.
