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BoE’s Bailey: do not assume long march upwards for rates

© Reuters. FILE PHOTO: Governor of the Bank of England Andrew Bailey reacts as he attends the Monetary Policy Report Press Conference at The Bank of England, in London, Britain November 4, 2021. Justin Tallis/Pool via REUTERS

LONDON (Reuters) – Bank of England Governor Andrew Bailey and other top officials from the British central bank were speaking to reporters on Thursday after they raised the BoE’s benchmark interest rate for the second time in two months, taking it to 0.5%.

GOVERNOR ANDREW BAILEY ON FURTHER RATE INCREASES:

“The MPC judges that if the economy develops broadly in line with the February report’s central protection, some further modest tightening of monetary policy is likely to be appropriate in the coming months.

“But it would be a mistake to extrapolate simplistically from what we have done today and assume that rates are now on an inevitable long march upwards.”

BAILEY ON WAGE PRICE SPIRAL

“I’m most decidedly not going to use the phrase wage price spiral, we’re not in the territory of that phrase in my view.

“What we are saying (…) is that we are seeing upward movement in what firms expect to be wage settlements.

“After adjusting for all the sort of the various COVID effects on the data, I think the underlying rate of wage growth is somewhat higher than we would expect it to be at this point in the cycle.”

BAILEY ON PRESSURE ON HOUSEHOLDS

“Unfortunately, we’ve got a squeeze from energy prices, and you see the OFGEM announcement this morning, and in order to counter the threat, and the risk that we see of further pressure coming from the labour market, I’m afraid we do have to raise bank rates.

“This is a lot of pressure on households, and we have to be very clear, a lot of pressure on those households who are less able to afford it.”

BAILEY ON MONETARY POLICY INFLUENCE ON LIVING STANDARDS

“We hope that we’ll get the better outcomes, obviously we really hope that.

“But (…) I have to be honest with you, that obviously some of the underlying, big underlying drivers of this are not things that monetary policy can influence.”

BAILEY ON SIGNS OF EASING OF SUPPLY CHAIN ISSUES

“Are we beginning to see evidence that those supply chain effects on those goods and blockages are now beginning to sort of resolve themselves?

“And our judgment will be yes, we are beginning to see some signs of that, but we need to see a lot more evidence of that to draw conclusions.”

BAILEY ON BEING BEHIND THE CURVE

“Are we behind the curve? No, you should not conclude that from the voting pattern.

“I think (…) it was a close call, but that’s not surprising given the situation we’re in.”

BoE’s Bailey: do not assume long march upwards for rates

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