Bank of England Governor Andrew Bailey told lawmakers on Tuesday that higher energy prices from the renewed U.S.-Iran conflict have so far had a limited impact on U.K. inflation. He called the Middle East situation unstable but said price data still points to soft passthrough into U.K. prices.
Higher energy prices stemming from the renewed conflict between the U.S. and Iran have so far done little to U.K. inflation, Bank of England Governor Andrew Bailey told lawmakers on Tuesday. The central bank's data continues to point to a limited effect, he said, even as the exchange of fire underscores how fragile the situation remains.
Bailey framed the latest flare-up as a warning about what lies ahead. He said the outbreak signals an unstable process ahead: according to MarketScreener, the flare-up "underlines that this is going to be an unstable process for the foreseeable future."
Energy prices climb again on renewed strikes
The U.S. launched its third consecutive night of strikes on Iran on Monday, citing repeated attacks on commercial vessels transiting the Strait of Hormuz. Oil and natural gas prices rose in response to the fresh hostilities. Before this, they had fallen on hopes of a lasting ceasefire that would let shipping move through the Strait again.
Inflation still above target but easing
Despite the energy swings, Bailey said the pass-through into consumer prices stays muted. He described the available evidence on the passthrough into U.K. prices as continuing to look fairly soft.
The U.K.'s annual rate of inflation stood at 2.8% in May, above the Bank of England's 2% target yet below the level recorded before the conflict began.
Source: MarketScreener
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