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Pill: Uncertainty on the impact of rate hikes

BOE
  • "This is not the first time we have seen changes in behaviour due to the pandemic. There is some evidence of slowdown in consumer, hospitality sectors etc. Need to monitor closely. Experience has shown it shows pattern of consumer spending as well as overall spending - substitution of spending in hospitality to household durable goods which are vulnerable to global supply chains that have been disrupted by Covid. Need to be cautious that just because Omicron weighs on confidence, that it might not have a negative effect on inflation in the medium-term. There is genuine 2-sided uncertainty."
  • "Traditional view - rate hikes affect economy through activity. We are not really tested on structure of economy and financial sector in recent times. So uncertainty on the impact."
  • "Had not expected wholesale gas prices to stay so elevated, but they have moved even higher and this is adding to transitory pressures. Distinguish this from those associated with labour market/domestically generated inflation which are likely to be more persistent and need a monpol response to ensure they are contained."
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