MNI BRIEF: BOE Cunliffe: Unconvinced Of Repeat Tightening Case

The Ukraine crisis will both drive the inflation peak higher and intensify the squeeze on household incomes, dampening demand, and that he was so far unpersuaded of the case for repeatedly tightening policy, Bank of England Deputy Governor Jon Cunliffe said Monday.

He said that the UK mindset is not one that is anticipating continually higher inflation and that structural factors, most notably changes in the labour market, suggested that unlike in the 1970s the country may not generate large scale second round inflation effects. "While I recognise the risk of second-round effects and that further tightening of monetary policy might be necessary, I am not at present convinced that we will inevitably have to lean heavily and constantly against an embedding of an inflationary psychology," he said.

Cunliffe voted against the March rate hike. The Bank will publish updated economic forecasts in May but he said that as a rough estimate the Ukraine war will add two percentage point to the 7% inflation peak previously forecast by the Bank.