Bank of England policymaker Breeden stated that UK inflation would already be at the 2% target if not for the war-related price shocks, attributing the recent uptick to external supply-side factors rather than domestic pressures. She described the central bank as being "in a good place" to monitor developments, suggesting policymakers can wait and see how the geopolitical situation evolves before acting.
Rate Hikes Unlikely Amid Weak Growth
Breeden argued that the inflationary impulse from the conflict is less likely to become embedded in wages and expectations, reducing the need for tighter policy. She also said there is little reason to raise interest rates given the UK's weak economic backdrop, emphasizing that sluggish growth remains a key consideration.
Market Pricing and Outlook
Her comments reinforce expectations that the BoE will remain patient, watching whether higher energy prices prove temporary or feed into broader inflation. Markets currently price in 27 basis points of tightening by year-end, with a first rate hike possible in September at the earliest (61% probability).