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BoE warns it may need to respond longer energy shock

BoE Deputy Governor Sarah Breeden said policymakers should not wait for conclusive evidence of second-round effects, warning the outlook depends on how long the energy shock lasts.

Reported · Written up by our desk · Central Banks

Bank of England Deputy Governor Sarah Breeden warned that it is “not at all obvious” there is a path toward lower energy prices, and said the longer the energy shock persists, the more likely it becomes that monetary policy will need to respond, according to Reuters via FXStreet.

Breeden noted the indirect pass through from higher energy prices has been limited so far, which may reflect slack in the UK economy, but she said the balance of risks has shifted and would make a BoE response increasingly likely if those risks materialize.

She also cautioned that policymakers cannot wait too long for conclusive evidence of second round effects on prices, signaling the BoE could act before those effects are fully confirmed.

In the immediate market reaction described by FXStreet, Breeden’s comments had little impact on sterling, with GBP/USD down 0.1 percent to around 1.3220 at the time of writing.

Latest closeGBP/USD 1.322 ▼0.9%

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