Taylor Douses Rate Hike Expectations with Cautious Energy Price Outlook

A Bank of England policymaker has downplayed the need for raising interest rates amid rising energy prices, saying it's 'not compelling' unless prices stay high for longer and have a broader impact on the economy.

Alan Taylor, a member of the Bank's Monetary Policy Committee (MPC), made this statement in a speech at the National Institute of Economic and Social Research (Niesr). He noted that energy costs are currently concentrated within the energy complex itself rather than spreading through the wider economy.

Taylor emphasized that the case for further rate increases 'should rest on evidence' of second-round effects, such as wage rises or price hikes due to changed behaviors. So far, there have been limited signs of these effects in the UK economy.

The policymaker's remarks echo those made by Bank Governor Andrew Bailey, who stated that energy prices are having direct effects but the pass-through to the wider economy is 'subdued'. Deputy governor Clare Lombardelli has also warned about potential interest rate hikes if there's particular weakness in the economy.