MNI BRIEF: BOE Bailey less worried about 2nd round inflation

Bank of England Governor Andrew Bailey noted Tuesday some encouraging signs that the inflation shocks from Covid re-opening and the Russian invasion of Ukraine have not de-anchored inflation expectations, making him less concerned about second round effects.

Inflation expectations appears to be well-anchored with shorter run expectations, which tend to track headline inflation, "returning towards target" Bailey said at a Banca d'Italia event and with the UK at, or near, full employment the 'sacrifice ratio', the rise in joblessness that the country will need to get inflation back to target, seemingly lower than it has been historically.

Bailey said that a year ago his concern was that the inflation shocks would fuel second round effects but that, tentatively, his concerns had eased. He said the key question now was how restrictive policy had to be for how long, with no clear steer to when the first rate cut will come.