The Governor of the Bank of England warned that shocking energy prices are pressuring the economy and pushing inflation deeper. If the situation persists, tighter monetary policy may be necessary, even as the economy begins to slow.
April 30, 2569 at 22.15:XNUMX, CNBC reported that Andrew Bailey, Governor of the Bank of England, stated that the central bank is facing its most difficult situation yet due to the economic impact. The United Kingdom is now under pressure from soaring energy prices.
Bailey stated in an interview that the outlook for energy prices remains highly uncertain, and if this pressure persists, it could lead to deeper inflation in the economy, as rising energy costs will be passed on to the prices of other goods and services.
He explained that the situation was a negative supply shock, which not only drove up prices but also impacted overall economic activity, making monetary policy significantly more difficult.
The Bank of England's Monetary Policy Committee (MPC) voted 8 to 1 to keep the policy interest rate (bank rate) unchanged at 3.75%, with only Huw Pill voting for a 0.25% increase.
However, Bailey signaled a hawkish stance, warning that if energy price pressures begin to pass through and embed themselves in the economy, the central bank may need to adjust monetary policy to control inflation.
He reiterated that bringing inflation back to the 2% target is achievable. "Extremely important." The bank will also closely monitor the impact of energy prices on the economy, labor market, and employment.
The latest data for March shows that the UK's consumer price index (CPI) rose to 3.3% from 3% the previous month, primarily driven by higher energy prices.
The Bank of England (BOE) also warned that inflation is likely to rise further towards the end of the year due to the impact of rising energy costs and expressed concerns about a second wave of effects, such as workers' demands for higher wages, which could further accelerate inflation.
Previously, the market expected the Bank of England (BOE) to begin cutting interest rates in 2569, but following the energy price crisis, that outlook has changed, with investors now seeing a possibility of further interest rate hikes this year.
refer : cnbc.com
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