MNI BRIEF: BOE Ramsden: Further Tightening Likely Needed

Further monetary tightening was likely to be needed to deal with the inflation shock, Bank of England Deputy Governor Dave Ramsden said Tuesday, although he made clear that current market rate assumptions were overblown. "Some further tightening seems likely to be needed, to prevent current high inflation becoming embedded in wage and price setting," he said.

Market rate assumptions have risen recently to show Bank Rate rising from 0.5% to peak near 2%. But if this rate path is plugged into the Bank model and everything else left unchanged "inflation would fall below our 2% target within two years and end the forecast at just 1.4%."

Ramsden's comments, with an updated projection for the latest market rate assumption, follow a familiar theme from policymakers in which they accept more tightening is required but push back against the idea that Bank Rate will rise as high as the market is assuming. Ramsden also highlighted how energy prices were a wildcard that could blow forecasts off track.