BOE Deputy Governor Warns on High Energy Prices and Potential Rate Hikes

Bank of England Deputy Governor Clare Lombardelli warned that prolonged high energy prices could lead to broader economic effects and potentially require interest rate hikes if not accompanied by clear signs of disinflation or weaker economic activity.

Lombardelli emphasized that wage growth remains too high, running counter to the Bank of England's inflation target. She noted that monetary policy is currently restrictive as officials balance lower inflation against risks of reduced demand.

The Deputy Governor clarified that she was not suggesting a mechanical response to energy price movements, but rather highlighted the importance of understanding how the underlying economy interacts with higher energy prices and how these effects spread through the system.