The Bank of England’s governor told MPs he is ‘concerned’ about the continued persistence of inflation, but expects the rate to halve this year.
09 February 2023
Policymakers at the Bank of England have said inflation is almost “guaranteed” to come down rapidly this year unless there is a new, unexpected global event.
Andrew Bailey, the Bank’s governor, told MPs during the Treasury Committee that he is “concerned” about the continued persistence of inflation, but expects the rate to halve this year.
He said: “We are concerned about persistence. This is why we raised interest rates at this time.
“I’m very uncertain, particularly about pricing and wages, and we have the largest upside force we’ve ever had on inflation.
“We do put weight on the persistent risks, but there are also very powerful downside forces this year.”
He insisted that there would be a “very powerful unwinding” of inflation throughout the year, which would only be derailed if there is a new external shock, like a development in the Ukraine war, that it cannot foresee.
Silvana Tenreyo, an external member of the Bank’s nine-person Monetary Policy Committee (MPC), stressed that declining inflation is all but guaranteed.
She told MPs: “Unless there is another big development that we do not or cannot know about, such as a new energy shock, I think a fall in inflation is pretty much guaranteed.
“We have tightened policy significantly over the past year and that’s going to have a large impact on demand, and will be the mechanism that brings inflation down to below target.”
Huw Pill, the Bank’s chief economist, added that it is important to exercise caution when looking ahead because of the very nature of economic “shocks”.
“I think it is important to recognise that if we get big shocks, and those shocks could be energy-related but something else too, then that will have an impact on inflation.
“But the character of shocks is that they will be unexpected. The reality is, we don’t have that close control of the economy.”
