BoE Chief Economist Huw Pill said in a speech that the central bank’s communication “rightly places the persistence of inflation at centre-stage”.
“Given the famous ‘long and variable lags’ in monetary policy transmission, it is the persistent component of inflation – that component of inflation that will still be there once the lags in monetary policy transmission unwind – that is the relevant object for the MPC’s attention,” he said.
He also noted, “the distinctive context that prevails in the UK – of higher natural gas prices with a tight labour market, adverse labour supply developments and goods market bottlenecks – creates the potential for inflation to prove more persistent.”
“It is therefore in this nexus that I focus in coming to my own assessment of the risks surrounding inflation persistence, which – consistent with the MPC’s collective communication – will strongly influence my monetary policy position in the coming months.”
