Banking
Bank of England should be cautious about raising rates -Tenreyro
Published by maria gbaf
Posted on November 8, 2021
2 min readLast updated: January 28, 2026
Global Banking & Finance Review®
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Published by maria gbaf
Posted on November 8, 2021
2 min readLast updated: January 28, 2026
Silvana Tenreyro suggests the Bank of England should cautiously approach interest rate hikes due to economic uncertainties and inflation pressures.
By David Milliken
LONDON (Reuters) -The Bank of England should take a cautious approach to raising interest rates as the economy remains below its pre-crisis size and the health of the labour market is hard to interpret, BoE policymaker Silvana Tenreyro said on Friday.
Tenreyro – who voted to keep the BoE’s Bank Rate at 0.1% on Thursday and has generally been cautious about tighter policy – said central banks faced a trade-off between supporting growth and fighting potentially persistent inflation pressures.
But they should not jump the gun in reacting to rising inflation, especially in Britain where economic output was still well below where it would have been without the COVID-19 pandemic, she said.
“Central banks, not just the Bank of England, will need to balance their inflation and real-economy objectives. This balancing requires in my view a cautious approach,” she told a conference hosted by the International Monetary Fund.
The BoE wrongfooted markets on Thursday by keeping rates on hold, despite remarks last month from Governor Andrew Bailey and chief economist Huw Pill that investors had interpreted as paving the way for an early rise.
Pill, speaking at a separate event on Friday, said the MPC saw “some need” to tighten policy, but not yet.
Tenreyro said she, like other policymakers, wanted a clearer sense from data of the impact of the end of Britain’s furlough programme, which stopped on Sept. 30 when around 1 million workers were still on it.
Although inflation expectations had risen, Tenreyro said this was in line with the events of 2008 and 2011 when energy prices had spiked but not led to persistent inflation.
Policymakers should meanwhile be “very watchful” of wage pressures. “As soon as we see that picking up, that’s where monetary policy has a bite. Monetary policy cannot really do anything about a spike in energy prices,” she said.
Some inflationary factors might prove persistent, “which means central banks are effectively in trade-off territory, having to strike a balance between how quickly to bring inflation back to target and how much to continue to support the economy through the ongoing recovery,” she added.
(Reporting by David Milliken; Editing by Alistair Smout, Guy Faulconbridge and John Stonestreet)
The article discusses the Bank of England's cautious approach to raising interest rates as advised by Silvana Tenreyro.
The UK economy is still below pre-crisis levels, and the labor market's health is uncertain, requiring a careful balance between growth and inflation.
Inflation pressures are rising, but they may not be persistent, similar to past energy price spikes that did not lead to sustained inflation.
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