BoE MPC member Michael Saunders said in a speech, “my own view is that further monetary tightening is likely, and indeed, as evident from my votes at the MPC’s recent policy meetings, my preference has been to tighten relatively quickly.”
“This partly reflects my view that risks are tilted on the side of a more persistent period of excess demand and domestic inflation pressures than implied by the most recent MPR forecast (published in early May),” he said.
“Unless restrained by tighter monetary policy, the relatively high level of longer-term inflation expectations implies that domestic cost growth and firms’ pricing strategies may remain above target-consistent rates even if capacity pressures ease to more normal levels.”
Also, the cost of “not tightening promptly enough – would be relatively high at present”, and “such an outcome would increase the costs of returning inflation to target in coming years.”
“rather than focus on a precise forecast for Bank Rate over the next year, the key point is that the tightening cycle may (in my view) still have some way to go.”
