BoE had to raise rates to tackle inflation pressure, Bailey says

LONDON (Reuters) – Bank of England Governor Andrew Bailey said the British central bank had been compelled to raise interest rates on Thursday, even as the Omicron variant of the coronavirus hits the economy, because inflation pressures were turning more persistent.

“We’ve seen evidence of a very tight labour market and we’re seeing more persistent inflation pressures and that’s what we have to act on,” Bailey told BBC television.

“We’re concerned about inflation in the medium term. And we’re seeing things now that can threaten that. So that’s why we have to act.”

Earlier the BoE raised its benchmark Bank Rate to 0.25% from its pandemic emergency low of 0.1%.

Bailey said Omicron could “certainly have quite an effect on activity in the economy” and there were already signs of impact on footfall among retailers and bookings at restaurants.

“It’s not however clear whether it will cause inflation pressure to come down or even go up, and that’s a very important factor for us,” he said.

(Writing by William Schomberg, editing by David Milliken)