BoE's Lombardelli says policy is increasingly likely to need to tighten if elevated energy prices persist

SECOND-ROUND EFFECTS The absence of evidence of second-round effects tells us something, but not much; it is likely still too early to see evidence in the data, especially given indirect effects are coming through more slowly than expected. ENERGY PRICES Energy prices have evolved more in line with the adverse scenario, while second-round effects look more like the central case. The longer higher energy prices persist, the greater the risk that indirect and second-round inflationary pressures build. INFLATION Direct pass-through to inflation has been broadly as anticipated, while indirect effects have been more limited than expected. Inflation risks are currently to the upside and waiting for evidence has limits. MONETARY POLICY Current monetary and financial conditions are restrictive and already leaning against inflationary pressures. Policy is increasingly likely to need to tighten if elevated energy prices persist, absent clear evidence of disinflation or weaker activity. Policy should not respond mechanically to energy prices; whether Bank Rate needs to rise depends on the interaction between the underlying economy, higher energy prices and their transmission.