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Tenreyro Advocates Patience in Lowering Inflation: BoE Policy

Bank of England policymaker Silvana Tenreyro emphasized that previous interest rate hikes need time to impact inflation. She cautioned against over-adjusting policy while the effects of past rate increases are still taking hold.

Bank of England
Bank of England

Tenreyro Quotes Friedman in Policy Discussion

At an International Monetary Fund panel in Washington, Tenreyro used a Milton Friedman analogy to describe setting economic policy, comparing it to adjusting a slow-to-respond shower's temperature.

Policymaker Opposes Further Rate Hikes

Tenreyro voted against another Bank of England rate increase last month, believing that past tightening was sufficient and could push inflation below target in the medium term.

Market Expectations for BoE Rate Increase

Financial markets predict a 67% chance that the Bank of England will raise its main interest rate to 4.5% from 4.25% next month, marking the 12th consecutive rate hike since December 2021.

Inflation Forecast and Comparison to Other Economies

Economists surveyed by Reuters anticipate a drop in consumer price inflation to 9.8% from 10.4%. Despite the decrease, this rate remains significantly higher than in the United States and most of Europe.

Tenreyro on the Complexity of Interest Rate Decisions

Tenreyro explained that even with perfect foresight, the Bank of England would have needed to raise rates dramatically during the COVID-19 pandemic to prevent double-digit inflation last year due to the long lags involved in interest rate changes.