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11th November 2021 - Monetary policy shouldn’t be used to offset short-lived shock
"MPC member Silvana Tenreyo spoke yesterday of her belief that monetary policy shouldn’t be a tool to fix short-term shocks to the economy.
She expects the supply chain bottlenecks that are causing a disparity between supply and demand to fade in 2022, but the economy will remain fragile and in need of the support that low rates are providing.
She went on to say that the bigger inflation will become a concern if it spills over into the wider economy. Tenreyro was backed in this view by the Bank’s Governor Andrew Bailey, who spoke of his concern that wage demands will create a spiral that will see inflation become a permanent issue.
Bailey was at pains to say that the Central bank is unable to control fuel and energy prices, and it is clear that a rise in interest rates would have no effect on the soaring wholesale cost of gas.
Bailey is still trying to regain a measure of credibility following the Bank of England’s apparent U-turn over a rate increase., investors were completely wrong-footed when the MPC voted 7-2 to leave interest rates unchanged last week.
"
Beyond Currency Market Commentary:
Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.
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By CurrencyTransfer
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"MPC member Silvana Tenreyo spoke yesterday of her belief that monetary policy shouldn’t be a tool to fix short-term shocks to the economy.
She expects the supply chain bottlenecks that are causing a disparity between supply and demand to fade in 2022, but the economy will remain fragile and in need of the support that low rates are providing.
She went on to say that the bigger inflation will become a concern if it spills over into the wider economy. Tenreyro was backed in this view by the Bank’s Governor Andrew Bailey, who spoke of his concern that wage demands will create a spiral that will see inflation become a permanent issue.
Bailey was at pains to say that the Central bank is unable to control fuel and energy prices, and it is clear that a rise in interest rates would have no effect on the soaring wholesale cost of gas.
Bailey is still trying to regain a measure of credibility following the Bank of England’s apparent U-turn over a rate increase., investors were completely wrong-footed when the MPC voted 7-2 to leave interest rates unchanged last week.
"
Beyond Currency Market Commentary:
Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.