Bank of England Governor Bailey Warns: The Longer the Energy Shock Persists, the Harder It Becomes to Resist Inflationary Pressure

Deep News
Oct 14

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Limited spots available, first come first served. Let us journey together toward the sustainable promise! [Click to Register] Bank of England Governor Bailey stated that the energy cost shock triggered by the US-Iran war currently has a relatively limited impact on overall UK inflation, but as time passes, it is becoming increasingly difficult to avoid broader inflationary effects.

"We need to focus on how this inflation shock transmits into indirect effects and second-round effects," Bailey said in a CNN interview broadcast on Tuesday. "For now, this transmission in the UK has been relatively moderate, which is obviously encouraging to me. But the longer it persists, the harder it becomes to manage."

When asked whether UK interest rates would be raised soon, Bailey did not answer directly. He said, "The analytical framework we have been relying on has not changed."

Last month, Bailey warned that the longer oil and gas costs remain elevated, the harder it becomes to resist pressure to raise rates.

Speaking in Bangkok on Tuesday on the sidelines of the International Monetary Fund (IMF) and World Bank annual meetings, Bailey said: "We are seeing stronger resilience in UK economic activity, which is a good thing, and we will obviously take that into consideration."

Although the Bank of England has so far not been forced to raise rates due to the energy shock, Bailey and several other swing-voting policymakers have hinted that they are considering supporting a rate hike next month.

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