Crucially, this threatens to create more persistent inflation dynamics in the UK, which continue even after the original impetus from external sources has dissipated or even reversed. It is via such second-round effects that higher current inflation can become embedded in the inflation process and achieve a self-sustaining momentum all of its own. Such behaviour would threaten a more sustained deviation of inflation from target, going beyond the realisation of the shorter-term volatility that I have already mentioned. Monetary policy implications (2) To emphasise: because the inflationary implications of second-round effects are more persistent, they are more relevant to the pursuit of the inflation target over the medium term. For the same reasons, they are more amenable to influence by monetary policy actions that operate through ‘long and variable lags’. By nature, persistent inflation dynamics will continue until the lags in monetary policy transmission unwind. And the difficulty of timing monetary policy actions precisely given uncertainties about how and when those lags unwind is less onerous when addressing more persistent – and thus lower frequency – developments in inflation. These are the reasons why the MPC has tended to place more weight on the evolution of  Page 8  domestic price and wage setting in assessing the UK inflation: not because it is a domestic component (even though it is), but because it is a persistent component, which matters more in sustainably achieving the inflation target.
Or (as in the MPC’s May 2022 monetary policy summary) entertain dissenting views not just on votes on Bank Rate but also on the communication reflected in the summary. 16. For a discussion of these risks and their potential consequences in a previous interest rate cycle, see Pill (2019). Page 13 17. See Bank Rate increased to 1.25%, Bank of England, 16 June 2022. 18. The views expressed in this speech are not necessarily those of the Bank of England or the Monetary Policy Committee. I would particularly like to thank Saba Alam and Nick Bate for their help in preparing the speech. I have also received helpful comments from Andrew Bailey, Tom Belsham, Ben Broadbent, Fabrizio Cadamagnani, Alan Castle, Andrew Hauser, Neil Kisserli, Catherine L Mann, Nick McLaren, Dave Ramsden, Michael Saunders, Fergal Shortall and Silvana Tenreyro, for which I am most grateful. The responsibility for all remaining errors is my own. Returning inflation to target - slides