Bailey: It's important not to overreact to temporary high inflation

Bank of England Governor Andrew Bailey said today that it is “important not to overreact to temporary strong growth and inflation to ensure the recovery is not undermined by a premature tightening of monetary conditions.” In his annual Mansion House address to financial services industry leaders, Bailey added that The Bank of England will watch carefully for signs of persistent inflation pressures, and has also emphasized that the BoE should not move too quickly due to rising inflation, the well-established reasons for the inflation jump are temporary.

Bailey explained that there are three reasons why the increase in inflation is likely to be temporary, which are the lack of supplies caused by the rush of pent-up demand, the bottlenecks associated with the pandemic, and the return to spending on services that would reduce demand focused on commodities.