JACKSON HOLE, Wyoming (Reuters) – Bank of England Deputy Governor Ben Broadbent said on Saturday that interest rates in Britain might have to stay high “for some time yet” as the central bank seeks to dampen the risks from the highest inflation rate among the world’s big rich economies.
Broadbent said in a speech that the knock-on effects of the surge in prices – such as pressure on employers to push up wages – were unlikely to fade away as rapidly as they emerged.
“As such, monetary policy may well have to remain in restrictive territory for some time yet,” Broadbent said in a text of remarks he was due to make at the annual Jackson Hole Economic Policy Symposium in the United States.
The BoE said earlier this month that borrowing costs were likely to stay high for some time as it raised rates for the 14th time in a row.
It has struggled to tackle an inflation rate that peaked at 11.1% last October and which, at 6.8% in July, remains more than three times its 2% target.
Investors expect another increase in the BoE’s Bank Rate to 5.5% from its current level of 5.25%, but this week they scaled back their bets on Bank Rate hitting a peak of 6% after a survey showed signs of a slowdown in Britain’s economy.
Broadbent said in the text of his speech that the BoE’s stance on interest rates would respond to “the evidence on spare capacity, and to indicators of domestic inflation, as and when it comes through.”
He also said it was reasonable to expect a decline in energy and core goods prices over next few months.
(Writing by William Schomberg; Editing by Paul Sandle)
