BoE's Bailey: Ready to respond with policy tools if we see signs of persistent inflation

The Bank of England Governor, Andrew Bailey, during a scheduled speech on Thursday, said that we are prepared to respond with the tools of monetary policy if there are signs of more persistent inflation pressure.

Additional Quotes:

• We do expect the cost of living to go up in the coming months
• That should only be short-lived.
• BoE shouldn't overreact to temporary inflation rise.
• All the indications are that for both demand and supply the decline caused by Covid will be temporary.
• There are at least three reasons why the increase in inflation should be temporary.
• The fall in output gap is nowhere near as large as would be implied by the fall in demand if this was a normal recession.

Market Reaction

The comments indicated that the UK central bank is in no hurry to tighten its monetary policy anytime soon. This, in turn, exerted some pressure on the British pound and momentarily dragged the GBP/USD pair below the 1.3800 mark.