BoE's Tenreyro: Further energy and tradable goods price increases likely imply more persistant inflation

Bank of England policymaker Silvana Tenreyro said on Wednesday that further increases in energy costs and tradable goods prices are likely to imply a somewhat greater persistence in inflationary pressures, according to Reuters. A further modest tightening of monetary policy settings, she continued, would be consistent with inflation returning to the BoE's 2.0% target sustainably, she added, caveating that the exact scale of tightening required is uncertain. 

Additional Remarks:

"The impact of the February rise in bank rate is more likely to have its peak impact when inflation is still above target than if we had waited too much longer."

"My policy decisions will seek to manage any temporary trade-offs that arise between inflation and the volatility of output."

"With the inflation pick-up from higher tradeable goods price inflation now set to be larger and likely more persistent than previously expected, I thought an earlier tightening would strike a better balance."

"The associated fall in real income is also likely to weigh on demand, independently of the policy stance."

Market Reaction

GBP has not reacted to commentary from Tenreyro but is instead weakening in line with a downturn in risk appetite after Newsweek reported that the US has warned Ukraine of a Russian plan to invade in the next 48 hours.