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BoE rate rise after one-off price shock would be ‘self-defeating’

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© Reuters. FILE PHOTO – Flowers are in bloom in front of the Bank of England in London on August 1, 2018, Britain. REUTERS/Peter Nicholls/File Photo

LONDON, (Reuters) – The Bank of England shouldn’t raise interest rates in an effort to combat inflation due to higher energy prices and semi-conductors. If it believes these effects are short-lived Silvana Tenreyro, a BoE policymaker said.

Tenreyro stated that “typically, for short-lived inflation effects, such as big increases in the price of semiconductors and energy prices, it is self-destructive to attempt to respond to them directly.” He was speaking to the Western Mail newspaper while he visited Wales to meet with business owners.

She said that “Activity is weaker than expected in our last forecast” and she maintained, “We remain in a normal-sized recession below pre-Covid GDP.”

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