Bank of England (BOE) policymaker Michael Saunders said on Friday that a key consideration for him at the December policy meeting will be the possible economic effects of the new Omicron variant, as reported by Reuters.

Additional takeaways

"It is likely that any rise in bank rate will be limited given that the neutral level of interest rates remains low."

"Provided we do not delay too long, it should be a case of easing off the accelerator rather than applying the brakes."

"Will need to consider the potential costs and benefits of waiting to see more data on this before – if necessary – adjusting policy."

"Assumptions are uncertain, especially in light of the new Omicron variant."

"It is within the range of possibilities that the new Omicron variant will significantly affect the economic outlook."

"If the economy develops in line with the MPR central forecast or my expectations, the direction of travel for bank rate during the next few quarters is clearly likely to be upward."

"Aggregate demand and supply could also both be affected by increased precautionary behaviour."

"If easing is required, the MPC has options to support the economy if needed – but this is not my central expectation."

"In considering if and when to adjust rates, there is always a case to wait and see more data."

"Given Omicron has only been detected quite recently, there could be particular advantages in waiting to see more evidence."

"Continued delay also could be costly."

"Not convinced by the view that it would be possible to lift labour supply (or significantly lift overall potential output) by aiming to run the economy hot."

"Delay on raising rates could require a more abrupt and painful policy tightening later. For me, the balance between these considerations is likely to be a key factor at the December meeting."

Market reaction

The GBP/USD pair extended its daily decline following these comments and was last seen losing 0.32% on the day at 1.3264.

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