Finance
Bank of England's Lombardelli says policy cannot always ignore inflation shocks
Published by Global Banking and Finance Review
Posted on September 30, 2025
2 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on September 30, 2025
2 min readLast updated: January 21, 2026
Clare Lombardelli of the Bank of England warns against ignoring inflation shocks, emphasizing the need to consider structural pressures.
HELSINKI (Reuters) -Central bankers need to be careful about assuming inflation shocks are temporary and not caused by longer-term structural pressures, Bank of England Deputy Governor Clare Lombardelli said on Tuesday.
Lombardelli said at a conference hosted by Finland's central bank that in the past, central banks had tended not to react to rises in inflation that they judged would be temporary, due to the time lags before rises in interest rates took effect.
But experience since the COVID-19 pandemic suggested the public's longer-term inflation expectations were sensitive to short-term rises in food prices, and that some increases could be part of a longer-term pattern of upward shocks, she said.
"For a lot of countries, a lot of commodities, food prices are quite high. Now that's very different if that is because it is a one-off weather event that we don't expect to be continued, or if it is a result of a climate change or something else, which is a structural change," she said.
"You have to think ... what if it is something which is temporary, but the effects might be more persistent?"
Lombardelli voted against the BoE's most recent interest rate cut in August and earlier this month she said she viewed current interest rates of 4% as being close to their neutral level, limiting the scope for further cuts.
The BoE's Monetary Policy Committee is also divided about the extent to which there have been structural shifts in Britain's labour market since the pandemic that could lead to higher inflation.
(Reporting by Anne Karaunen, writing by David Milliken and Suban Abdulla in London; Editing by Sarah Young)
Clare Lombardelli emphasized that central bankers should be cautious in assuming inflation shocks are temporary and may be influenced by longer-term structural pressures.
Since the COVID-19 pandemic, it has been observed that the public's longer-term inflation expectations are sensitive to short-term rises in food prices, indicating that some increases may be part of a longer-term trend.
Lombardelli voted against the Bank of England's most recent interest rate cut in August, suggesting that current interest rates of 4% are close to their neutral level.
The BoE's Monetary Policy Committee is divided regarding the extent of structural shifts in Britain's labor market since the pandemic, which could potentially lead to higher inflation.
Lombardelli noted that the impact of food prices can vary significantly depending on whether they are influenced by one-off weather events or if they indicate a longer-term trend.
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