By David Milliken
LONDON (Reuters) – The Bank of England’s current series of interest rate rises may take longer to be felt than during previous tightening cycles, and have limited effect on inflation in the very short run, BoE policymaker Swati Dhingra said on Tuesday.
Dhingra, giving a lecture at Manchester Metropolitan University, focused on the need for better measures of price changes and company profits to fully understand how the economy responded to inflation shocks.
“The lags in monetary policy transmission imply that there is little we can do to affect inflation in the immediate future,” she said.
“There are reasons to suspect that policy transmission will be slower than previous cycles,” she added.
Dhingra pointed to the increased proportion of British households who hold fixed-rate mortgages, although she also noted that higher borrowing costs were already hurting households seeking mortgages and pushing up rents.
Financial markets upped their bets on the number of future BoE rate rises on Tuesday after stronger-than-expected labour market data, which showed the fastest nominal wage growth on record, outside of distortions during the COVID-19 pandemic.
Dhingra, who has voted against recent BoE rate increases, said the strength of the labour market underlined how long it was taking for the effect of past rate rises to be felt.
“Overall, data outturns indicate that the economy is starting to recover from the large supply shocks – albeit with ongoing hardship for some of the most disadvantaged individuals and families in our society,” she said.
The BoE was committed to returning inflation to its 2% target, she added.
(Reporting by David Milliken; editing by William James and Andy Bruce)
