The Bank of England (BoE) will bring inflation back down to its 2% target from more than 9% now, governor Andrew Bailey said.
“The Committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response. Bringing inflation back down to the 2% target sustainably is our job, no ifs or buts”, Bailey said in a speech hosted by OMFIF, a central banking think tank.
Inflation, which hit a 40-year high of 9.1% in May, is expected to hit 11% this autumn.
The Bank of England has increased interest rates for a record fifth time in a row in seven months.
They’ve been hiked to a 13-year high of 1.25%, which will push up the cost of getting a mortgage.
“The scale, pace and timing of any further increases in Bank Rate will reflect the Committee’s assessment of the economic outlook and inflationary pressures,” Bailey said.
Investors see a nearly 70% chance of a bigger-than-usual, half-percentage-point rate hike by the BoE on 4 August.
However, Bailey suggested that low interest rates will return once the effects of COVID and the war in Ukraine fade.
“Cyclical adjustments in short-term nominal interest rates – like those we are currently witnessing in the United Kingdom and abroad – will for the foreseeable future continue to be played out against the backdrop of low global equilibrium real interest rates,” Bailey said.
This week, Bailey told MPs that he still thinks inflation will fall sharply next year.
"I always go into forecasts with an open mind, and that's critical, but I think the basic fundamentals of that profile remain in place today."
Inflation is expected to be back to its 2% target in around two years' time, he said, although pressure on gas prices following the war in Ukraine could change that.
The central bank said last month it was ready to act "forcefully" if needed to prevent the recent surge in inflation from becoming embedded in the economy.