MNI BRIEF: BOE Tenreyro Tells Lawmakers Policy Rate Too High

Evidence to the Treasury Select Committee highlighted the fragmentation on the Bank of England Monetary Policy Committee over policy, with Silvana Tenreyro noting that the central forecast showed inflation falling from its latest double digit reading to well below target. "In my view rates are too high right now," she said, having opposed the 50 basis point hike to 4.0% at the February meeting.

Governor Andrew Bailey said it was a fair question to ask why the MPC had hiked given its projection of below target inflation ahead but that for him the uncertainties were high and a key upside risk came from weak supply in the UK labour market. "We have had this other shock which is the tightening of the domestic labour market" and particularly the rise in inactivity," Bailey said, although he added that the Bank's agents had found firms reporting the first signs of easing in labour conditions.

On the hawkish side MPC member Jonathan Haskel stated in his written evidence that he was prepared to act forcefully if need be if inflation pressures prove persistent, thereby restoring previous guidance which had been ditched by the committee.