Breeden Warns of Monetary Policy Response to Energy Price Shock

Bank of England Deputy Governor Sarah Breeden expressed concerns about the impact of rising energy prices on the UK economy. In a recent statement, she noted that it is 'not at all obvious' that there will be a path to lower energy prices.

Breeden highlighted that the indirect pass-through from higher energy prices has remained limited so far, potentially reflecting slack in the UK economy. However, she warned that the larger and longer the energy shock persists, the more likely it becomes that monetary policy will need to respond.

The BoE policymaker emphasized that policymakers cannot wait too long for conclusive evidence of second-round effects on prices, citing the importance of focusing on firms' pricing decisions as a key indicator.