BOE May Bear Temporary Above-Target Inflation to Support UK, Bailey Says

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Bank of England Governor Andrew Bailey stated that the BOE might tolerate inflation above its 2% target temporarily to support the UK economy, provided second-round price effects do not emerge. This approach reflects caution amid economic softness and uncertainty surrounding shock impacts.

The Bank of England could temporarily tolerate inflation staying above its 2% target in order to support the UK’s weak economy, Governor Andrew Bailey said, so long as second-round price effects do not emerge. “Given the context of softness in the real economy and uncertainty around the scale and duration of the shock, tolerating temporarily above-target inflation to provide some support for the real economy is an appropriate way to approach the trade-off,” Bailey said at an economic conference in Reykjavík, Iceland. (Source: Bloomberg)