[8] Taken together, persistent supply shocks of this nature potentially pose a dilemma for monetary policy in the sense that improved energy efficiency and more stable oil prices have supported, and continue to support, consumption and investment, but risk entrenching expectations of low inflation.
The MPC is thus cognisant of the increased possibility of second-round effects if the shock is to food prices. Admittedly, we have seen some encouraging developments recently, mainly as a result of renewed search-for-yield strategies based on changed perceptions about the pace of US policy normalisation and easing measures elsewhere.