It seems inflation isn't only the problem for the USA, as even Britain is going through its worst inflation in decades. And recently, the interest rate setter from the Bank of England has come up with new comments.
According to Jonathan Haskel, the central bank of England will have to be 'Really, Really Careful!' about how it approaches the high inflation problem. For now, inflation has become embedded in the economy, and it seems that the only tool at the disposal of the central bank is rate hikes.
In theory, rate hikes in the UK would slow down the economy, eventually putting a drag on consumer spending. The end result would be the slowdown of inflation in the UK. But let's not forget that it would come at a very high economic cost!
For now, there's high uncertainty regarding the inflation situation in the UK, and we will have to wait for the next inflation print. But, it seems that BoE officials like Haskel are very cautious when it comes to handling inflation in the country.
According to Haskel, he would prefer to make a policy based on how the economic data comes in the next few months. This was revealed in a recent interview he gave to an online news site this Monday.
Just like a week, Haskel also commented on how the central bank is ready even to act forcefully to control the persistent inflation in the country.
In the Monetary Policy Committee of the UK, Haskel serves as an external member. And if we look at the comments from other members of the committee, it seems they also share the same views.
In our opinion, the current economic situation and even the geopolitical arena leave very little space for inflation to go down in 2023! Although it would go down a little we don't expect a big drop in the inflation reading anytime soon.