Bank of England policymakers laid out a clear divide over how to respond to a renewed energy price shock at a Treasury Committee hearing in parliament on Tuesday. Governor Andrew Bailey said energy costs are already high and could climb further, Megan Greene argued for pre-emptive tightening, and Dave Ramsden said soft domestic wage growth still justifies holding rates.
The Bank of England's rate-setters laid out a clear divide over the renewed energy shock at a Treasury Committee hearing in parliament on Tuesday. Governor Andrew Bailey said energy prices are already elevated and could rise further, pointing to disruption around the Middle East as well as pressure on refining capacity. Megan Greene pushed for acting early against the risk, while Dave Ramsden argued domestic wage data still supports patience.
Bailey Flags Energy and Food Price Risks
Bailey told the committee that part of the widening crack spread reflects Ukrainian attacks on concentrated Russian refining capacity, not only disruption tied to the Strait of Hormuz. His message was that the inflation shock spans more than a single geopolitical channel. Bailey also flagged food prices as a further risk: he said food price inflation has come in under where the Bank thought it would, but warned the risks remain tilted higher and that stronger food inflation is already built into the Bank's year-end forecast.
Greene Makes the Case for Acting Early
Greene, who voted for a 25bp rate hike in July, made the strongest case for pre-emptive action. Her concern centers on how long elevated oil prices persist and whether that persistence feeds second-round effects through wages and prices. According to ActionForex: "then you can course correct, you'll stay on top of inflation". The logic is asymmetric — tightening too early can be reversed, but letting persistent inflation take hold may prove harder to undo.
Ramsden Points to Soft Wage Growth
Ramsden offered the counterargument. He acknowledged the global inflation outlook carries more upside risk, but stressed that domestic wage growth has come in below the Bank's forecasts this year. That softer domestic picture was enough for him to support holding Bank Rate at 3.75% at the previous meeting rather than back Greene's call for a rate hike. The disagreement centers less on whether the external shock matters than on how much weight still-benign domestic evidence deserves before the Bank acts.
Bailey's own remarks kept inflation risks elevated without committing him to either side of the divide.
Source: ActionForex
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