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BoE won’t let high inflation get embedded, Cunliffe says

Bank of England Deputy Governor Jon Cunliffe said the British central bank will ensure that the recent surge in inflation does not become embedded in the economy.

“It’s our job to make sure that as this inflationary shock passes through the economy we don’t find that leaves us with inflation being the new normal, the sort of embedded psychology,” Cunliffe told BBC radio.

“We will act to make sure that doesn’t happen.”

Britain’s main inflation rate hit a 40-year high of 9.1% in May and the BoE has forecast it will top 11% in October.

It has raised interest rates five times since December and said last month that it would act “forcefully” if it saw signs of inflationary pressures becoming more persistent.

Many investors expect the BoE will raise rates by half a percentage point on Aug. 4, its next scheduled monetary policy announcement date.
However, the BoE must also contend with signs that Britain’s economy is slowing, something Cunliffe acknowledged in his interview with the BBC.

“What we expect is that the cost-of-living squeeze will actually hit people’s spending and that will start to cool the economy,” he said.

“We can see signs that the economy is already slowing.”
Source: Reuters (Writing by William Schomberg; Editing by William James and Kim Coghill)

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