Bank of England Sounds Alarm on Energy Inflation Risks

The Bank of England has highlighted concerns about energy inflation, citing external risks as a major worry. According to Andrew Bailey, the US-Iran war has led to higher energy prices, which could still rise further. Ukrainian attacks on Russian refineries have also contributed to the surge in energy costs.

Monetary policy is being held at a 'moderately restrictive' level, says Bank of England policymaker Sarah Taylor, providing insurance against external risks. However, Taylor warns that persistent energy-price rises could alter wage and price setting, requiring a forceful response from policymakers.

Ramsden, another policymaker, notes that the domestic inflation position is relatively benign, but global inflationary pressures are mounting. He also points out that UK wages have come in below expectations due to the ongoing conflict.