Breeden Flags Energy Price Risks Amid Sterling Volatility

Bank of England Deputy Governor Sarah Breeden warned that energy price risks are persistent and may require a central bank response. She said it's 'not at all obvious' there is a path towards lower energy prices, which could lead to higher inflation.

Breeden pointed out that the indirect pass-through from higher energy costs has been limited so far, but this is due to slack in the UK economy. However, she emphasized that policymakers cannot wait too long for conclusive evidence of second-round effects on prices.

Markets showed a limited reaction to Breeden's comments, with sterling staying under pressure and trading around 1.3220 at the time of writing.