# BoE’s Bailey speaks about surging inflation and rate hikes Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-09-07 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Bank of England Governor Andrew Bailey on Inflation and Meta Description: Bank of England Governor Andrew Bailey discusses the recent decision to raise interest rates and the challenges of double-digit inflation in the UK. URL: https://financedigest.com/boes-bailey-speaks-about-surging-inflation-and-rate-hikeshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-09-07t100644z2lynxmpei860igrtroptp4britain-inflation-1736815265806-compressed.jpg) LONDON (Reuters) – Bank of England Governor Andrew Bailey and other top officials from the British central bank spoke to lawmakers on Wednesday about last month’s decision to raise interest rates to their highest since 2008 in the face of double-digit inflation. GOVERNOR ANDREW BAILEY ON ENERGY SUPPORT PLAN “It’s not for us to comment on what fiscal policy will be and we will wait and see what it is…but I do very much welcome the fact that there will be, as I understand it, announcements this week because I think that will help to, in a sense, frame policy and that’s important” “It’s important that there is a clear way forward on policy… That will be [important for markets to understand](https://www.financedigest.com/changing-face-b2b-business-practices-understanding-timeless-behaviour-important-ever.html "The changing face of B2B business practices – why understanding timeless behaviour is more important than ever.") what is going to happen. GOVERNOR ANDREW BAILEY ON BOE MANDATE The [inflation target](https://www.financedigest.com/the-mouse-that-roared-new-zealand-and-the-worlds-2-inflation-target.html "The mouse that roared: New Zealand and the world’s 2% inflation target") … has proved to be very successful. In 25 [years since](https://www.financedigest.com/japans-emperor-gives-first-public-new-years-greeting-since-2020.html "Japan’s emperor gives first public New Year’s greeting since 2020") this regime came into existence … [inflation has averaged pretty much exactly on target](https://www.financedigest.com/euro-zone-inflation-seen-just-above-ecbs-target-in-2025-poll-shows.html "Euro zone inflation seen just above ECB’s target in 2025, poll shows"). This is by far the [biggest shock we are facing](https://www.financedigest.com/platinum-facing-biggest-deficit-in-years-as-carmakers-snap-up-metal.html "Platinum facing biggest deficit in years as carmakers snap up metal") during the life of that, but it is not does not suggest that the regime has failed. What it [suggests is that the regime now has to do its work](https://www.financedigest.com/new-research-suggests-over-13-million-brits-were-inadequately-managed-while-working-remotely.html "NEW RESEARCH SUGGESTS OVER 13 MILLION BRITS WERE INADEQUATELY MANAGED WHILE WORKING REMOTELY*") and respond to a much bigger shock and we are confident that it will do so. CHIEF ECONOMIST HUW PILL ON [INFLATION AND GOVERNMENT](https://www.financedigest.com/factbox-how-governments-are-trying-to-ease-inflation-pain.html "Factbox-How governments are trying to ease inflation pain") ENERGY PLANS One of the [things that does seem to be under consideration](https://www.financedigest.com/the-six-things-you-need-to-consider-before-starting-or-investing-in-an-ico.html "The six things you need to consider before starting or investing in an ICO") … is a [change to the relationship between gas prices](https://www.financedigest.com/explainer-oil-price-surge-changes-ecb-narrative-only-at-the-margins.html "Explainer-Oil price surge changes ECB narrative only at the margins") and retail gas prices in a direction that will lower headline inflation, relative to what we were forecasting … where that relationship was based on the mechanics of the Ofgem price gap. “So I think that in the short term would tend to weigh on inflation. Against that, some of the implications of supporting household incomes – particularly household incomes towards the less well off households – support [demand in the economy](https://www.financedigest.com/turkeys-economy-grew-7-6-in-q2-driven-by-domestic-demand-exports.html "Turkey’s economy grew 7.6% in Q2 driven by domestic demand, exports"), and other things equal, would probably lead to slightly stronger inflation. Net-net on the implications for [headline inflation](https://www.financedigest.com/boes-mann-falling-headline-inflation-high-core-make-policy-difficult.html "BoE’s Mann: Falling headline inflation, high core, make policy difficult") in the short term, I would expect that to see a decline. Will [fiscal policies generate inflation](https://www.financedigest.com/explainer-bracket-creep-fiscal-drag-how-inflation-warps-the-tax-take.html "Explainer-Bracket creep, fiscal drag: how inflation warps the tax take")? We are here to ensure that they don’t generate inflation. So fiscal policies will have their own dynamics as will other shocks to the economy, and we as the [central bank](https://www.financedigest.com/central-banks-keep-hiking-rates-amid-banking-turmoil.html "Central banks keep hiking rates amid banking turmoil"), our role is, our mandate is, our remit is to return inflation to the target and I think that’s what we’re trying to do, that is what we are doing, that is that is what we will do. [CHIEF ECONOMIST](https://www.financedigest.com/ecb-should-raise-rates-at-steady-pace-chief-economist-says.html "ECB should raise rates at steady pace, chief economist says") HUW PILL ON MONETARY POLICY The more important question from a monetary policy [point of view is what are the implications of these changes](https://www.financedigest.com/foley-catheters-market-pin-point-analysis-for-changing-competitive-dynamics.html "Foley Catheters Market: Pin-Point Analysis For Changing Competitive Dynamics") and the other fiscal changes that you mentioned, which I don’t have good insight into, but have also been flagged. I mean, what are the implications of those for inflation at the what we typically label, [monetary policy](https://www.financedigest.com/uks-ftse-100-dips-on-scope-of-tighter-monetary-policy-informa-jumps.html "UK’s FTSE 100 dips on scope of tighter monetary policy; Informa jumps") relevant horizon, which is the horizon at which the lags in monetary policy unwind, the decisions we make today, how they affect inflation in the future? And I think there, not only does it depend on the macroeconomic [effects of the various fiscal changes](https://www.financedigest.com/cornerstones-of-effective-organisational-change-management.html "Cornerstones of effective organisational change management") … I think there’s just too much uncertainty to have a strong view right now, given the lack of details.” MPC MEMBER TENREYRO ON RISK OF OVERSHOOTING I judged that the more gradual pace of [tightening will allow us to reduce those risks](https://www.financedigest.com/analysis-rbc-tightens-grip-at-home-with-10-billion-hsbc-canada-bid-regulatory-risks-loom.html "Analysis-RBC tightens grip at home with billion HSBC Canada bid, regulatory risks loom"), because we will see the effects of the data and we can always stop. “So it’s about going slowly when there is a lot of uncertainty. And that was my judgement.” “Given the uncertainty, my strategy will be to consider further tightening until we see firmer evidence.” (Reporting by Sachin Ravikumar, Muvija M and David Milliken; editing by William James and William Schomberg) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---