Monetary policy will be restrictive for an extended period of time, according to the Bank of England's deputy governor for financial stability.
In her first speech since taking up the job in November, Sarah Breeden, set out her view on the UK economic outlook heading into 2024.
The speech, held earlier this week (December 19), she said while the economic outlook was improving there was still hard work ahead to return inflation to two per cent.
Breeden, who is a member of the Monetary Policy Committee, said: "The economy is moving in the right direction to return inflation to the two per cent target, but our job isn’t done.
"The question I am focused on is whether there is evidence of more persistent inflationary pressures which means we may need to tighten further.
"Regardless, monetary policy still needs to be restrictive for an extended period of time to keep pushing down on inflation and to return it sustainably to target."
She said she will be using scenario analysis to determine how to vote on the Bank of England rate going forward.
Breeden gave two example scenarios, one in which interest rates could rise and the other which could see them fall.
A high inflation scenario could see the bank rate rise to almost 7 per cent, in the next three years while a low inflation scenario could see it fall to below 3 per cent.
"I intend to approach monetary policy decisions in the coming months paying great attention to how real world outcomes differ from our expectations and adjusting accordingly," she said.
"Scenario analysis is a helpful policy tool against a backdrop of unprecedented shocks. I will approach each vote humbly and pragmatically, with no pre-determined policy path in mind."
tara.o'connor@ft.com
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