Bank of England Monetary Policy Committee member Dingra said on the 24th that the long-term inflation impact on the UK from higher crude oil prices amid escalating US-Iran tensions will become evident in winter, when energy demand rises. He said medium-term inflation factors will also begin to become clearer by the end of the year, signaling caution about early rate cuts. Speaking at a meeting of the UK think tank the National Institute of Economic and Social Research, Dingra said more will be known about the course of wage negotiations and their final level as winter approaches, and noted that monetary tightening is already underway. On the other hand, he said there has not been the broad-based price surge seen in 2022, when energy prices spiked following Russia's invasion of Ukraine, and the labor market is also softening, arguing that with UK demand levels below those of the United States and the benchmark rate higher than in the euro area, the Bank of England's decision to hold rates was appropriate. Dingra supported holding rates steady at this month's Monetary Policy Committee meeting. He also suggested that the expanding use of artificial intelligence could lead to slower inflation in the services sector, and said the UK's medium-term inflation expectations are not at a concerning level. Bank of England Deputy Governor Lombardelli also said on the 24th that unless the economic slowdown becomes pronounced, rate hikes will be necessary in response to persistently high energy prices.
BoE's Dingra and Lombardelli signal caution on early rate cuts and possible hikes due to oil-driven inflation, pushing UK 10Y yields up.
BoE officials' hawkish stance against early rate cuts supports sterling versus the dollar.
