Breeden Flags Interest Rate Hike as Inflation Risks Mount

Bank of England Deputy Governor Sarah Breeden signaled support for raising interest rates in response to growing inflation risks. Speaking at the UK Macro Policy Forum, she warned that policymakers should not delay action while waiting for signs of second-round effects from high energy prices.

Breeden stated that waiting too long could lead to regret and that 'the larger and longer the shock, the more likely it is that we’ll see the material second-round effects that policy needs to respond (to)'. She added that 'I wasn’t there in September (in terms of being ready to vote for a rate hike), but I was mindful that the balance of risks had shifted, and as risks crystallise it’s increasingly appropriate for Bank Rate to respond.'

Breeden's comments align with a recent change in tone from the Monetary Policy Committee, which could pave the way for a rate hike in November. The European Central Bank and U.S. Federal Reserve have already raised rates.