Lombardelli says policy is already leaning against persistence and will tighten further if needed
Victoria Shinder1 min readSpeaking at the Sixth Biennial Conference on Macroeconomic Policy in Warsaw, Bank of England Deputy Governor Clare Lombardelli set out the outlook for inflation and, more usefully, the framework the Monetary Policy Committee is using to work out how recent energy price increases will feed through into inflationary pressure.
The speech covers the size and volatility of the energy shock, how the UK economy has responded to it, and the underlying inflationary dynamics beneath the headline. The Bank's own summary states the stance without hedging: monetary policy is already leaning against the risk of persistent inflationary pressures, and will be tightened further if needed.
What it means
The word to hold on to is persistent. An energy shock produces a price level effect that a central bank can look through; what it cannot look through is that shock feeding into wage-setting and pricing behaviour and becoming an inflation rate. The framework Lombardelli describes exists to distinguish the two in real time, which is the hard problem — the data separating them arrives with a lag long enough that by the time it is unambiguous, the decision has already been made.
The conditional at the end is doing most of the communicative work. "Already leaning against" tells markets the current stance is being characterised as restrictive rather than neutral, and "tightened further if needed" keeps the direction of the next move open without promising it. For anyone pricing the gilt curve, the actionable content is not a rate path — there isn't one in here — it is which indicators the MPC has told you it is watching to decide whether the shock has stopped being a price level event.