BoE's Pill explains why he supported raising bank rate to 4% in recent MPC meetings; argues that clear, prompt and decisive policy action and communication would help steer markets, reduce uncertainty and support monetary policy transmission

Add, thereby avoiding that inflationary pressures originating in the Middle East become embedded and persistent. Own response has pointed to a need to raise bank rate to 4%. Raising bank rate on this basis need not be the start of a prolonged and aggressive series of increases. A prompt increase in bank rate may serve to head-off some of the potential insidious ‘catch up’ dynamics. Clear, prompt and decisive policy action and communication would help steer markets and reduce uncertainty. MPC should be cautious about using relatively extreme ‘what if’ scenarios to explain its analytical framework. 'Fine-tuning' interest rates in the face of uncertainty about energy prices is problematic. Reasons to believe that second-round effects now will be stronger than estimated in ‘halcyon days' of inflation targeting. Unconvinced labour market slack means no second-round effects. Iran war has not de-anchored long-term expectations. Wait-and-see approach risks status quo setting of rates.