Despite slower growth, the Bank of England will have to raise interest rates to control inflation, a senior Bank of England official said.
Sir Dave Ramsden, a member of the Central Bank’s Monetary Policy Committee (MPC), said inflation was difficult to deal with in the light of the gloomy outlook, which was lower than expected in the first quarter of the year.
Output rose 0.8 percent, a strong start to the year after the lifting of the Omicron ban. The economy fell 0.1 percent in March after flattening in February as households refrained from spending in light of rising living costs.
Ramsden, who left the Treasury to join the MPC in 2017, said lower levels of unemployment and competition for workers could lead to further price increases. Inflation, which hit 7 percent in March, is expected to surpass 10 percent in October when energy prices are lifted a second time.
“Of course, based on my current assessment of prospects, we still don’t know how far monetary policy needs to be tightened,” Ramsden told Bloomberg News. “I am still very, very supportive of the forward guidelines that may need to be tightened in the coming months.
“Given what we know about the UK labor market, I wouldn’t be surprised if it gets a little tough. . . I think there is a reverse risk to inflation in the medium term. “
The war in Ukraine is throwing a high level of uncertainty over the economic forecast but the next meeting next month will be an opportunity to take stock, Ramsden said. Throwing. “
He declined to comment on market expectations that interest rates would reach 2.5 percent by this time next year. Such a forecast would require six rate increases in the next eight meetings.
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Ramsden was in the majority who voted for a 13-year high of 1 percent to raise interest rates by 0.25 percentage points at the MPC meeting last week. Three members wanted to go further, raising the rate by 0.5 points to 1.25 percent.
The bank became the first of the world’s major central banks to raise borrowing costs in December, when the committee voted to raise interest rates from a historic low of 0.1 percent to 0.25 percent.
Ramsden said households and businesses should have confidence in the bank’s ability to bring inflation down to 2 percent, adding: “At the moment, for families, especially at the lower end of income distribution, I can only imagine. Dealing with rising food and energy prices. “