(Reuters) – The Bank of England will have to act if it sees expectations of higher inflation pushing up wages, BoE Governor Andrew Bailey said, echoing his recent message about the direction of monetary policy which last week led to a jolt in financial markets.
“What we’re concerned about … is once you start to get an increase in inflation of this sort we want to stop it becoming generalised in the economy,” Bailey said during an online question-and-answer session organised by the BoE on Monday.
Bailey said there was a risk of more bottlenecks in the economy, especially in demand for labour which could fuel expectations of higher inflation.
“And that’s why we would, and will, have to act on interest rates if we see that evidence becoming clear,” he said.
Last week, the British central bank wrong-footed many investors when it kept its benchmark interest rate on hold, little more than two weeks after Bailey said the BoE would have to act to contain inflation expectations.
(Reporting by William Schomberg and Michael Holden)