- Further tightening seems likely to be needed in the near-term
- That is to prevent current high inflation becoming embedded in wage and price setting
- Scarring effects of COVID-19 appear likely to be smaller than feared
- Further modest tightening in policy is likely to be appropriate in the coming months
- There also downside risks to inflation and risks from tightening too much
We all know that the BOE will hike rates further in the months ahead so the headline is what perhaps matters more. It is all about where they see the terminal rate being for the latest tightening cycle. For now, it is pretty much take it as it goes but what happens when rate hikes fail to rein in price pressures in the months ahead? I mean, the simple fact is that monetary policy is not adept to deal with the current inflation situation so there is that to consider.
