*
BoE's Bailey "very uncertain" about inflation pressures
*
Haskel still open to "forceful" upward rate moves
*
Tenreyro says she may consider voting for rate cut
*
Markets expect just one more quarter-point rate rise
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Pill says BoE needs to "see it through" on tightening
(Adds Huw Pill quote)
By David Milliken and Andy Bruce
LONDON, Feb 9 (Reuters) - Bank of England policymakers
disagreed on Thursday about where interest rates need to go to
tame inflation, with Governor Andrew Bailey stressing the
uncertainty of the outlook, a week after the BoE suggested its
run of rate hikes might be peaking.
Monetary Policy Committee members struck contrasting notes
when addressing parliament's Treasury Committee on the risks
posed by an inflation rate that hit a 41-year high of 11.1% in
October before falling to 10.5% in December - still more than
five times the BoE's 2% target.
Jonathan Haskel, an external MPC member, told the committee
he remained ready to "act forcefully" against persistent
inflation, a phrase dropped by the majority of his colleagues
last week.
At the other end of the debate, Silvana Tenreyro - who voted
against half-point hikes last week and in December - said
interest rates were already too high and that she might consider
voting for a cut in future meetings.
Like other central banks, the BoE is trying to reduce the
risks from the surge in inflation and it raised interest rates
for the 10th time in a row last week, taking Bank Rate to its
highest since 2008 at 4% from 3.5%.
But it is also worried about aggravating what is expected to
be a lengthy if shallow recession this year, which most other
countries will avoid.
Last week, Bailey signalled the tide was turning on
inflation, even if it was too soon to declare victory.
Financial markets and economists now reckon the BoE will
raise rates by just 0.25 percentage points more - either next
month or in May.
Before the BoE's most recent meeting, markets thought rates
were more likely to peak at 4.5% in mid-2023.
On Thursday Bailey again said the inflation tide appeared to
have turned but reiterated the risks to the BoE's main forecasts
that it will be below target by mid-2024.
"I am very uncertain particularly about price-setting and
wage-setting in this country. We have got the largest upside
skew in our forecasts that we have ever had on inflation,"
Bailey said.
DIFFERENT RESPONSES
Thursday's comments underlined how policymakers are
responding differently to uncertainty about how fast longer-term
inflation pressures will subside after last year's energy price
shock.
Haskel aligned himself with Catherine Mann who also sees big
upside risks to the BoE's price forecasts.
"Economic theory suggests that uncertainty around the
persistence of inflation should be met with more forceful
action," Haskel said in his annual report to parliament.
"(So) I shall remain alert to indications that inflation is
more persistent than we expected, and act forcefully if
necessary."
By contrast, Tenreyro said the full force of the BoE's rate
hikes over the last year had yet to be felt, with economic
momentum already fading.
"Rates are too high right now," she said. "I would see
myself considering a cut."
BoE Chief Economist Huw Pill said there were some signs of a
weakening in the labour market but the central bank's job of
tightening policy was not over.
"It's crucial to see it through, that we do enough to
address potential upside risks to inflation," he said.
Businesses might have greater pricing power than expected,
or workers more success at bargaining for higher wages - both
factors that could slow inflation's return to target, he said.
(Reporting by David Milliken in London and Andy Bruce in
Manchester, England; additional reporting by Suban Abdulla;
editing by William Schomberg, Christina Fincher and Hugh Lawson)
