MNI BRIEF: BOE Tenreyro Backs Front-loading Policy Tightening

The balance of risks shifted in favour of "front-loading" policy tightening, with prompt action justified to ensure that tightening will have its full effect when inflation is above the 2.0% target set for the MPC, Bank of England Monetary Policy Committee member Silvana Tenreyro said Wednesday. She gave no steer towards timing of future policy moves, but argued the case for tightening further sooner rather than later.

Rate hikes take 12 to 18 months, on the Bank's analysis, to have their full effect, and the MPC's February Monetary Policy Report showed inflation staying above target for two years before dropping below it in the third year based on a market rate projection.

Tenreyro, speaking at NIESR, backed Feb's 25bps hike, saying " the outlook and the risks had shifted in favour of a more front-loaded tightening" with the pick-up in inflation set to be larger and more persistent than previously expected. She argued that earlier tightening would strike a better balance between output and inflation volatility.