Interest rates could rise this year, the Bank of England’s governor has warned, if supply shocks cause by Covid prove “structural”.
While emphasising that the present assumption was that “price pressures will be transient”, Andrew Bailey said that the bank would “step in and adjust policy” if necessary.
All members of the monetary policy committee were ready to raise rates, he said. Bailey added that the recovery was slowing and that the next few months would be the “hard yards”.
The bank is conducting a supply side stocktaking to establish whether the productive capacity of the economy has been affected by Covid and whether inflation will persist. Its conclusions will be published in early November.
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