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BOE's Bailey: Longer High Energy Prices Persist, Harder to Hold Rates
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Bank of England Governor Andrew Bailey stated that artificial intelligence could become a positive supply shock in an era dominated by negative supply shocks. He noted that the pass-through of energy prices to the broader economy has been relatively mild so far but remains in its early stages. Bailey warned that the longer high energy prices persist, the more difficult it will be for the central bank to maintain its current stance of not raising interest rates. He also confirmed that the Bank of England is taking into account the rise in mortgage rates when assessing monetary policy. The remarks suggest a cautious but evolving outlook on inflation and interest rate decisions.
Source report
Bank of England Governor Andrew Bailey has commented on several key economic issues, including the potential impact of artificial intelligence and the challenges posed by energy prices.
Key Points
- Artificial Intelligence: Bailey described AI as a potential "positive shock" in what has been an era dominated by negative supply shocks.
- Energy Price Transmission: The transmission of energy prices into the broader economy is currently "quite moderate," though Bailey cautioned that this assessment remains at an early stage.
- Interest Rate Stance: The longer high energy prices persist, the more difficult it becomes to maintain a position of not raising interest rates.
- Mortgage Rates: Bailey confirmed that rising mortgage rates are being taken into consideration in the Bank's policy deliberations.
Source
domesticNeutral / independent
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Bank of England Officials Warn Persistent High Energy Prices May Force Rate Hikes