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BoE’s Breeden: Soft growth means less need to hike rates
Breeden said the policy response depends on whether higher energy costs show up in wages and broader pricing behavior, citing labor-market slack.
Bank of England Deputy Governor Sarah Breeden said the UK’s soft economic outlook lowers the risk that a rebound in oil prices turns into persistent inflation. In remarks to Bloomberg TV, Breeden argued that slack in the labor market makes it less likely that energy costs feed into wages and wider price-setting.
Breeden also pointed to renewed fighting involving the United States and Iran, saying it has once again clouded the inflation outlook given continued uncertainty around energy prices. She reiterated that the BoE’s monetary policy stance remains largely wait-and-see, and that policy does not need to react unless there is evidence of second-round inflation effects becoming embedded.
The deputy governor noted she expected inflation to return to the Bank’s 2% target absent the renewed Middle East conflict. She nevertheless said the BoE is not ruling out tighter policy, adding she would support higher interest rates if energy costs start feeding into wages and corporate pricing decisions, creating a broader inflation feedback loop.