BoE’s Tenreyro: No need for more rate rises as inflation on course to slow
2023.06.29 14:18
© Reuters. FILE PHOTO-Silvana Tenreyro, professor in economics at the London School of Economics, participates in a panel titled “How Should Central Banks Battle High Inflation?” at the 2023 Spring Meetings of the World Bank Group and the International Monetary
By David Milliken
LONDON (Reuters) -Key drivers of British inflation such as wage growth and core goods prices are on track to slow, removing the need for further interest rate rises, Bank of England policymaker Silvana Tenreyro said on Thursday.
Tenreyro has opposed raising interest rates since December, and voted against the BoE’s rate rise last week, which was her final meeting as an external member of the Monetary Policy Committee after two three-year terms.
“Overall, I … judged that the tightening already in the pipeline would be sufficient to bring inflation back to, and most likely below, the target,” Tenreyro said in a speech hosted by the Society of Professional Economists and the Resolution Foundation think tank.
Last month the BoE forecast inflation would drop to just over 5% by the end of this year and below 2% by early 2025, but some BoE policymakers have doubts about the models used to make these forecasts and fear inflation will be higher.
BoE Governor Andrew Bailey said last week the central bank needed to raise interest rates by half a percentage point to 5% because of signs that inflation was proving stickier than expected, after unexpectedly strong wage and inflation data.
Tenreyro said this data could imply “a slightly slower decline in domestic inflationary pressures,” but was outweighed by a sharp tightening in financial conditions, as market interest rates had soared in recent weeks.
“The disinflationary impact of this would be more than sufficient to offset the recent data news, even in the unlikely event that all of that (inflation) news proved to be persistent,” she said.
“Forward-looking indicators had pointed towards falls in both pay growth and core-goods inflation over the rest of the year,” she added.
British inflation surged last year to a 41-year high of 11.1%, after Russia’s invasion of Ukraine caused a surge in European prices.
Tenreyro said recent declines in energy and commodity prices would put this process into reverse, though it could take time to affect the cost of some services and wage growth.
