(Adds comments on lessons from financial crisis)
LONDON, Oct 17 (Reuters) - Bank of England Governor Andrew
Bailey sent a fresh signal on Sunday that the British central
bank is gearing up to raise interest rates for the first time
since the onset of the coronavirus crisis as inflation risks
mount.
Bailey said he continued to believe that the recent jump in
inflation would be temporary, but that a surge in energy prices
would push it higher and make its climb last longer, raising the
risk of higher inflation expectations.
"Monetary policy cannot solve supply-side problems - but it
will have to act and must do so if we see a risk, particularly
to medium-term inflation and to medium-term inflation
expectations," Bailey said during an online panel discussion
organised by the Group of 30 consultative group.
"And that's why we at the Bank of England have signalled,
and this is another such signal, that we will have to act," he
said. "But of course that action comes in our monetary policy
meetings."
The BoE has forecast that Britain's inflation rate will go
over 4%, more than double its target, as the world economy
reopens from its COVID-19 lockdowns, causing shortages of
supplies and staff, and the price of energy soars.
Investors are speculating that the BoE might become the
first of the world's biggest central banks to raise rates, later
this year or early in 2022.
Bailey said demand for workers in Britain had been stronger
than expected and the number of younger and older workers
leaving the labour market had grown.
"I do have concerns about labour supply growth," he said.
But Bailey said he did not believe there was a "general
pattern of labour market pressure" as wages climbed strongly in
some sectors but less so in others.
He also said there were lessons for governments seeking to
prevent future supply chain shocks in the way financial
regulators had responded to the shock of the global financial
crisis of 2007-09, including regular stress tests.
"I'm not saying we have the magic answer to supply chains
across the board, but I think there are lessons that we have
learned in terms of resilience that can usefully be adapted and
used and translated into some other markets, particularly for
instance when I look at energy supply," he said.
(Reporting by William Schomberg; Editing by Kevin Liffey)