Startup Observer.com
  • Home
  • Industries
  • Innovation
  • outsourcing
  • Business
  • Finance
  • Headlines
  • Opinion
  • News
Home Finance BoE’s Saunders worries inflation will be higher than forecasts
Finance

BoE’s Saunders worries inflation will be higher than forecasts

by jcp May 9, 2022
May 9, 2022
gawdo

By David Milliken and William Schomberg

LONDON (Reuters) -Bank of England policymaker Michael Saunders, who called in vain for a big interest rate hike last week, said inflation risked exceeding BoE forecasts that already go above 10%, and urged the BoE to “lean heavily” against it.

With price growth already more than three times the BoE’s 2% target, Saunders and two other members of the nine-strong Monetary Policy Committee voted to raise Bank Rate from 0.75% to 1.25% at their meeting last week.

But a majority of six members backed a smaller rise to 1.0% as they worried about signs of an economic slowdown.

Saunders said in a speech that he put “considerable weight” on the risk that inflation pressures would probably be greater and more persistent than expected by the BoE.

He told an audience at the Resolution Foundation think tank that the BoE should “lean strongly” against high inflation expectations because “the process of re-anchoring price expectations could be very costly in economic terms”.

Key measures of longer-term price growth expectations were uncomfortably high and were feeding into underlying pay growth and services inflation.

“The strength of external costs is eroding real incomes and is likely to cap real spending,” Saunders said, acknowledging the concerns of his colleagues.

“But, by creating a long period of above-target inflation, these external cost increases also may exacerbate the rise in inflation expectations and hence, with the tight labour market, could make it harder to ensure domestic inflation pressures return to a target-consistent pace.”

Britain’s consumer prices rose by 7.0% in the 12 months to March – a 30-year high – and the BoE said last week that inflation was likely to peak at more than 10% later this year, causing a sharp economic slowdown or possibly a recession.

Saunders warned that high inflation eroded the BoE’s ability to loosen monetary policy during future downturns.

“That credibility is not infinite and cannot be taken for granted,” he said.

As well as the inflationary pressures hitting many other global economies, Britain also had to contend with the fallout from its departure from the European Union and its single market which had hurt investment and productivity, he said.

He also said the neutral rate of interest – the level at which it neither stimulates nor restrains demand – might be somewhere in the range of 1.25% to 2.5%.

Replying to a question after his speech, Saunders said financial markets were pricing that kind of range for Bank Rate over the next five years and he was inclined think that was suitable for estimating the neutral rate.

Saunders voted for a 50 basis-point rate hike in February as well as last week but backed a 25 basis-point increase in March. He told reporters that his May decision was based on the calmer conditions in financial markets at that point.

(Reporting by David Milliken and William Schomberg; Editing by Hugh Lawson)

www.gawdo.com
Share on FacebookShare on TwitterShare on Linkedin
0 FacebookTwitterPinterestEmail
previous post
REMOTE WORKING CAUSES SIX OUT OF TEN PARENTS TO SUFFER BURNOUT
next post
Airline body IATA sees industry recovery now in 2023

You may also like

Banks delayed handling of losses worsen financial crises

June 28, 2022

Best bite: Kaspersky reveals phishing emails that employees...

June 28, 2022

Five Low-Cost Strategies to improve employee wellbeing

June 28, 2022
Editorial & Advertiser disclosureEditorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.
gawdo.com
https://www.gawdo.com
  • About us
  • Advertising & Terms of Use
  • Contact Us
  • Privacy Policy

@2021 - All Right Reserved.


Back To Top
Startup Observer.com
  • Home
  • Industries
  • Innovation
  • outsourcing
  • Business
  • Finance
  • Headlines
  • Opinion
  • News
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
Cookie SettingsAccept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT