Bank of England officials are now divided! The opposite of “second-in-command” and hawks: companies are absorbing the impact of energy inflation on their own

The Zhitong Finance App learned that Bank of England Deputy Governor Sarah Breeden (Sarah Breeden) said that British companies are seeking to absorb energy shocks and cut costs on their own rather than raise prices to consumers — at the same time, two other officials seem to be making arguments for interest rate hikes.

Briden's statement suggests that she is cautious about the need to raise interest rates. She pointed out that a weak labor market has dampened wage pressure; and the private sector showed resilience after another surprisingly steady gross domestic product (GDP) data was released earlier on Thursday.

“What's really different now compared to when there was an energy shock in 2022 is that people aren't looking to pass on costs,” she said in an interview in Bangkok on Thursday. “When I talked to companies, many of them were hedging, which meant that the impact they are feeling now is less than they could have been.”

Briden's tone is more dovish than many of his colleagues — the latter suggests he is leaning towards supporting interest rate hikes as early as next month. Earlier on Thursday, Megan Greene (Megan Greene), who is also a BoE policymaker, made a statement about interest rate hikes to “prevent the risk of a second round effect.”

Greene, who voted for an immediate rate hike last month, is in the minority. She said there is growing evidence that the UK economy's “idle capacity may have peaked,” and quoted better-than-expected GDP data released this morning.

“The possibility of a second-round effect seeping in is actually quite high,” she said at an event in the Thai capital — where the International Monetary Fund is holding its annual meeting.

In another event, Bank of England's chief economist Huw Pill (Huw Pill) — a well-known hawkish in the Monetary Policy Committee — warned that an upcoming wage agreement poses a threat: inflation is expected to break through 4% early next year while related negotiations are ongoing. He said that in an economy where supply is limited, economic activity and the labor market are showing resilience.

Traders are betting that the revival of oil and gas prices will force the Bank of England to raise interest rates for the first time in more than three years in November. Governor Andrew Bailey (Andrew Bailey), who is a key swing ticket, has said that the longer the energy shock and the Middle East conflict drag on, the harder it is to avoid higher interest rates.

Bank of England officials said that there is still little evidence that inflation is spreading widely in the economy, and Thursday's GDP data points to another strong performance in the third quarter.

Breeden said the company had “learned the lesson” — the last energy shock occurred when the Russian-Ukrainian war broke out four years ago.

“We are surprised that the economy has so far absorbed this considerable energy price shock so far,” she said. “It's encouraging to me that I have this feeling — as we saw in this morning's GDP data, there was no cliff-style decline in economic activity. The labor market is getting through this hurdle, and companies are willing to absorb the shocks themselves rather than pass them on, making it slightly easier for policy makers who monitor the situation to work in these uncertain times.”

However, she stressed that whether the impact of the energy shock has been weakened or simply postponed is still an open question.