Bank of England rate-setter Alan Taylor has said policymakers should not rush into raising borrowing costs in the face of the Iran war energy price shock, but said \u201call hands on deck\u201d would be needed to navigate the current crisis.<\/p>\n
In a speech in New York, Mr Taylor reiterated that he sees a \u201chigh bar\u201d to increasing interest rates in response to the current surge in global oil and gas prices caused by the Iran war.<\/p>\n
He said: \u201cMonetary policy is not well suited to address sudden energy shocks, which are unpredictable and outside policymakers\u2019 control.<\/p>\n
\u201cIntervention is only warranted if a large shock threatens to destabilise inflation expectations; otherwise, policy should focus on medium-term inflation targets.\u201d<\/p>\n
The Bank\u2019s nine-strong Monetary Policy Committee (MPC) voted unanimously earlier this month to hold rates at 3.75% but signalled it was ready to raise borrowing costs should war in the Middle East keep energy prices elevated.<\/p>\n
It warned that inflation was now set to reach up to 3.5% by the third quarter \u2013 well above its 2% target.<\/p>\n
While the Bank said it \u201cstood ready to act\u201d, Mr Taylor suggested he would not be in a rush to raise rates.<\/p>\n
He said: \u201cIf disruptions persist and the shock grows, the MPC will face a tougher choice between high inflation and weaker growth.<\/p>\n
\u201cThe rate path will depend on the trade-off.<\/p>\n
\u201cGiven massive uncertainty around future energy prices, and our starting point, I currently see a high bar to hiking.<\/p>\n
\u201cHolding policy steady is preferable until the impact becomes clearer.\u201d<\/p>\n
The Bank had been expected to cut rates before the conflict began on February 28, but financial markets are now pricing in two or more hikes by the end of the year due to the rising inflation outlook.<\/p>\n
The Bank will next decide on rates on April 30, when it will also have its latest quarterly economic forecasts to hand.<\/p>\n
Mr Taylor said: \u201cOur latest decision should not be seen as a shift in direction; the current circumstances suggest that little change is needed at this stage.<\/p>\n
\u201cThe UK faces low risks of inflation becoming unanchored, with a small shock thus far (in the grand scheme of things), a weakening labour market, and slowing wage growth.\u201d<\/p>\n
He said the \u201cgrowth-inflation trade-off\u201d has become more acute, \u201ccomplicating matters further\u201d and stressed the current situation would require a \u201cfull effort\u201d from policymakers.<\/p>\n
Mr Taylor added: \u201cGeopolitical and energy price shocks, which have been the biggest threat to price and macroeconomic stability in the past, now once again continue to pose risks that are largely outside the control of monetary policy.<\/p>\n","protected":false},"excerpt":{"rendered":"Bank of England rate-setter Alan Taylor has said policymakers should not rush into raising borrowing costs in the…\n","protected":false},"author":2,"featured_media":37518,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[16557,3508,375,34,196,12856,16559,16558,11625],"class_list":{"0":"post-37517","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-iran","8":"tag-alan-taylor","9":"tag-bank-of-england","10":"tag-energy-prices","11":"tag-iran","12":"tag-iran-war","13":"tag-monetary-policy","14":"tag-monetary-policy-committee","15":"tag-mr-taylor","16":"tag-policymakers"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@iran\/116296868367079265","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/37517","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/comments?post=37517"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/37517\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media\/37518"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media?parent=37517"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/categories?post=37517"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/tags?post=37517"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}