-The Bank of England said U.K. inflation would explode above expected levels above 4% as officials reckoned on the need for some moderate tightening in due course to keep price growth under control.
Michael Saunders was so concerned that he signed up for stimulant to wind down as soon as possible. That stance was overruled by the rest of the eight-member Monetary Policy Committee, who judged that higher inflation would be mostly transitory, though they flagged the need to take their foot off the stimulus pedal to meet their 2% inflation target 'in the medium term.
The economy is projected to experience a more powerful inflation period in the near term than forecast in the May report, officials said in a statement. 'Some reasonable tightening of monetary policy over the forecast period is likely to be necessary.
Officials led by Andrew Bailey also gave more clues about their approach to eliminating stimulus when the time comes, saying that they will start to unwind their 875 billion-pound quantitative easing program when the interest rate reaches 0.5%, much lower than previously signaled.
After the decision, U.K. 10- year bond yields were little changed - at 0.51%, abolishing an earlier one-basis rate increase.
A spike in inflation in the wake of the pandemic has increased the focus on the prospects for tighter policy from central banks around the world, although most insist the jump is temporary. The BoE does too, its assessment of the peak has significantly increased from the previous level of above 3% predict in May.
The BOE's position still chimes with a global hawkish shift. In New Zealand, for example, officials abruptly curbed quantitative easing in July and may even raise rates this month. Meanwhile, on Wednesday the U.S. Federal Reserve Vice Chairman Richard Clarida said the central bank is on course to launch paring bonds purchases later this year before lifting interest rates in 2023.