Bank of England’s Alan Taylor says case for rate hike ‘not compelling’

LONDON, Sept 29 (Reuters) — Bank of England Monetary Policy Committee member Alan Taylor said the case for higher rates will stay weak unless elevated energy prices begin to feed more clearly into broader inflation. Taylor said the recent jump in gas and oil prices could push headline inflation considerably higher over the winter, but argued that was not enough on its own to justify a rate increase. He said signs of second-round inflation effects were scant, adding that food inflation has been slower than expected and underlying pay growth remains consistent with inflation at target.

In a lecture to Britain's National Institute of Economic and Social Research, Taylor said further tightening is not compelling to him unless energy prices stay high for an extended period and create clearer signs of transmission into broader inflation persistence. 75% earlier this month. Taylor said he would need to see clear evidence that second-round effects are under way before backing a rate rise, according to minutes of the BoE’s rate decision. He added that the case for raising interest rates was not compelling.

1% in August. British inflation has spent almost all of the past five years above its 2% target. Taylor said he did not see the current outlook as comparable with 2022, when Russia’s full-scale invasion of Ukraine pushed oil prices higher, worsened a tight post-COVID labour market and drove inflation into double digits. He said rising public expectations for inflation did not necessarily provide a reliable guide to future risks.

He added that inflation in many energy-intensive goods and services categories had not accelerated as much as might have been expected after such a visible energy shock. Reporting by David Milliken; Editing by Sam Tabahriti and Mark Porter. +44 20 7513 4034.