BoE Governor Andrew Bailey pledged in a speech, “I can assure you that the MPC will adjust Bank Rate as necessary to return inflation to target sustainably in the medium term, in line with its remit.”
“If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required,” he added.
In the baseline modal projection of May Report, which is conditional on a market-implied path for interest to peak at 4.75% in Q4, inflation will fall materially below the 2% target in the medium term.”
However, he noted, “risks to inflation are skewed significantly to the upside”, primarily reflecting the possibility of more persistence in domestic wage and price setting. Also, the “unwinding of second-round effects may take longer than it did for them to emerge”.
This “asymmetry” was not made as part of the baseline modal projection. Instead, “we think of this as a material upside risk to the inflation outlook over the medium term.”