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BoE official says extended energy shock could justify further hikes

Alan Taylor argued the hurdle for tightening depends on whether energy-driven pressure turns into second-round effects and starts to show up beyond relative price moves.

Reported · Written up by our desk · Central Banks

Bank of England Monetary Policy Committee member Alan Taylor said the central bank should not respond automatically to changes in energy prices, describing them as mainly relative price shocks, according to FXStreet.

Taylor said the policy stance would need reassessment if energy pressure builds and second-round effects begin to gain traction, and he added that once energy risks abate, policy would likely need to move in the other direction.

FXStreet also notes that Taylor voted to hold rates at the last BoE meeting, when the majority kept the policy rate unchanged at 3.75%.

He added that a case for rate increases would be cemented if energy prices remain high for an extended period, and he said the burden of proof for additional tightening should rest on evidence that second-round effects are actually gaining traction.

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