Bank of England’s Deputy Governor for financial stability, Sarah Breeden, has indicated that she is now less concerned about persistent inflationary pressures in the U.K. and the need for further interest rate hikes. Speaking at a UK Women in Economics Annual Networking Event, Breeden highlighted her new focus on determining the duration of interest rates remaining at their current level.
Breeden stated, “I have become less concerned that rates might need to be tightened further. Instead, my focus, and indeed the focus of many on the Monetary Policy Committee (MPC), has shifted to thinking about how long rates need to remain at their current level.”
She further explained that recent surprises in services price inflation and wage growth have provided evidence suggesting less persistence in inflation than previously estimated in the central forecast. Consequently, her concerns regarding a potential emergence of greater inflation persistence have diminished.
Breeden emphasized her intention to closely monitor pay growth and demand’s impact on firms’ pricing decisions. This analysis will help assess her level of confidence in the sustained return of inflation to the Bank of England’s target of 2.0% over the medium term.
In the recent MPC meeting, Breeden was among the majority as she voted alongside five other committee members to maintain interest rates at 5.25%.
