Bank of England Deputy Governor Sarah Breeden said raising interest rates is becoming increasingly appropriate as inflation risks build from high energy prices. Sterling slipped to a near three-month low against the dollar as traders raised bets on a US rate increase in October.
Bank of England Deputy Governor Sarah Breeden said Thursday that raising interest rates is becoming increasingly appropriate as inflation risks build from high energy prices. According to Reuters, Breeden told the UK Macro Policy Forum, organized by the National Institute of Economic and Social Research, that "as risks crystallise it's increasingly appropriate for Bank Rate to respond."
Sterling slipped to $1.322 against the dollar on Thursday, its lowest level since 1 July, as traders anticipated the US Federal Reserve is more likely to raise interest rates in October.
Clare Lombardelli, another Bank of England deputy governor, echoed the message, telling the Sixth Biennial Conference on Macroeconomic Policy in Warsaw that an energy shock tied to the Middle East conflict is likely to keep pushing UK inflation higher. She said businesses have proven more resilient to elevated energy costs than the Bank expected, but the longer prices stay high, the greater the risk they pass through into wages and domestic prices. UK inflation stands at 3.8%, according to Crypto Briefing — double the Bank of England's 2% target.
Analysts at Investec said the Bank's patience with elevated energy costs is wearing thin and now expect a 25-basis-point rate rise in November, followed by another increase in February. The desk tied its call to the Strait of Hormuz, saying continued disruption to energy flows there would push committee members toward a rate hike.
Sources: Economy News, Business | The Guardian, Crypto Briefing
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