Taylor Warns of Inflation Risks, Emphasizes Disciplined Monetary Policy Approach

Bank of England Monetary Policy Committee member Alan Taylor emphasized that monetary policy should remain vigilant but disciplined in response to energy price shocks. He stated that policy stance should not respond mechanically to moves in energy prices, which are mainly relative-price shocks.

Taylor also warned about non-trivial inflation risks but noted that evidence points against a general inflation shock and the economy has so far appeared less susceptible to repeat of 2022's inflation dynamics.

The Bank of England recently kept rates at 3.75%, with Taylor voting to keep them unchanged. He said the burden of proof for additional tightening should rest on evidence that second-round effects are gaining traction, adding that further increases were not compelling unless energy prices stayed high for an extended period and fed through into broader inflation persistence.

Taylor stated that once energy risks abate, policy would need to move in the other direction.