Breeden Backs Interest Rate Hike as Inflation Rises

Bank of England Deputy Governor Sarah Breeden said it's 'increasingly appropriate' to respond to rising inflation by raising interest rates. She made this statement at a UK Macro Policy Forum, where she also emphasized the need for policymakers not to wait too long for signs of second-round effects from high energy prices.

Breeden noted that the larger and longer the shock, the more likely it is to see material second-round effects that policy needs to respond to. She said her views on a rate hike had shifted, and as risks crystallize, it's increasingly appropriate for Bank Rate to respond.

Market analysts have been pricing in around 100 basis points of interest rate hikes over the next year. Breeden focused on the next decision, due in November, asking if the first move is needed. She also acknowledged that the BoE cannot ignore market pricing of rate hikes.