A top Bank of England official said that the central bank´s inflation forecast for the second quarter of 2022 may need to be raised.
“The aggregate rate of inflation is likely to rise further over the next few months and the chances are that it will comfortably exceed 5% when the Ofgem (regulator) cap on retail energy prices is next adjusted, in April,” BoE deputy governor, Ben Broadbent, said in a speech at the Leeds University Business School.
Nevertheless, on a two-year horizon, pressure on goods prices due to supply chain disruptions were more likely than not to “subside” and not “intensify”.
Broadbent also emphasised the time lag between changes in Bank Rate and their impact on the economy, telling his audience that it could be as long as two years.
“What we can do – and what is the best possible approach – is to think at every meeting about the level of interest rates that will maximise our chances, a couple of years from now, of hitting the inflation target exactly.”
At their last meeting, rate-setters at the BoE had predicted that inflation would top out at 5.0% before falling.