LONDON (Businesshala) – The size and duration of the recent surge in inflation is proving to be higher than expected, but interest rates are likely to remain relatively low for years to come, said Hu Pill, chief economist at the new Bank of England.
“As the pandemic recedes and global demand and supply levels and structures normalize, these inflationary pressures should ease,” Pill said in a response to lawmakers’ questions published on Thursday.
“But the magnitude and duration of the transient inflation spike is proving to be greater than expected.”
His comments came after the BoE’s September policy statement said Britain’s consumer price inflation rate is likely to exceed 4% – more than double the BoE’s target – and the case for the first interest rate hike since the coronavirus pandemic strengthened. .
Pill said the risks to the central bank’s economic and inflation forecasts were “again clearly being two-sided” after the economy shrank by about 10% in 2020 due to the pandemic, but the BoE raised rates sharply. There was no possibility.
“I expect interest rates to remain relatively low for years to come, even as the impact of the COVID-19 pandemic looms large,” he said.
The former Goldman Sachs economist also said that negative interest rates – now part of the BoE’s arsenal – are “both possible and likely to ease monetary conditions” but they were no panacea and they were likely limited to 50% of the additional reduction. Or 100 basis points. Bank rate.
Earlier on Thursday, a BoE survey showed that British companies had raised their inflation expectations.
The BoE said year-ahead annual price inflation was expected to be 3.5% in the three months to September 2022, up from 3.2% in the August survey.
The survey of nearly 2,900 businesses, conducted between 3 September and 17 September, before the recent surge in energy prices and increasing supply and staff shortages has led some private economists to say that the UK The consumer price inflation rate of 5% will be affected.