IMF warns Bank of England of delay in raising interest rates

Burr David Milliken

LONDON (Reuters) – The International Monetary Fund on Tuesday urged the Bank of England to avoid the “inaction bias” in raising interest rates, as it expects British inflation to reach a 30-year high, around 5.5%, in 2022.

The Bank of England said rates must rise to ensure consumer price inflation – currently 4.2% – returns to its 2% target in the next two years.

However, the Bank of England refrained from raising interest rates last month due to concerns about the impact of the end of the state-funded temporary job loss programme, and is expected to do so again on Thursday due to the spread of the Omicron coronavirus.

The International Monetary Fund said the Bank of England faces a difficult decision, but it should not be long overdue.

He added, “It will be important to avoid complacency bias, given the costs associated with containing (inflation) round two shocks. Careful communication will be essential to lay the groundwork with markets for potential monetary policy moves more frequently.” .

Rising global inflation has been exacerbated by rising energy prices and supply chain bottlenecks caused by the COVID-19 pandemic in the UK due to Brexit barriers to trade and immigration.

(Reporting by David Milliken, translated by Thomas Cobos. Editing by Javier Lira)