LONDON (Reuters) – Bank of England Chief Economist Andy Haldane warned on Friday that inflation had “awakened a tiger” and could be difficult to repress as the economy recovers from COVID-19 epidemic which may call on the BoE to take action.
In a clear break from other members of the Monetary Policy Committee (MPC) who are more relaxed about the outlook for consumer prices, Haldane called inflation “a tiger (that) fueled by dramatic events and policy actions in the Last 12 months. ”.
“People have a right to be wary of the risks of central banks over-preservation by tightening premature policy,” Haldane said in a speech published online. “But for me, the biggest danger right now is being somber in the central bank letting the (big) inflation cat out of the bag. ”
Haldane ‘s views on British government bond prices fell to their lowest level in nearly a year and sterling rose as he warned that investors may not be in a suitable position for higher inflation risk or BoE rates.
“Risk inflation tends to be more difficult to predict, requiring monetary policymakers to act more confidently than they currently do in financial markets,” Haldane said.
He noted the BoE’s latest estimate of a much weaker economic economy, which was much smaller and less likely to be stable than it was after the 2008 financial crisis, leaving less room for economic growth. before it created prices.
Haldane also said there were many savings raised by businesses and families during the pandemic that could be released in the form of higher spending, as well as the government’s broad fiscal response to the disease. spread and other items.
Disinfection forces could return if threats from COVID-19 or other sources prove more stable than expected, he said.
But in Haldane ‘s judgment, inflation rose above the BoE’ s 2% target for a stable period – compared to official forecasts released early this month which showed only a very small forecast in 2022 and early 2023.
Haldane’s comments put him at the most hawkish end among nine MPC members.
Deputy Governor Dave Ramsden said on Friday the risks to UK inflation were well-balanced.
“I see the prospects of inflation – no matter what stage you look at – anchored well,” Ramsden said after a speech given online, responding to comments from co-deputy governor Ben Broadbent Wednesday.
Edited by Larry King and John Stonestreet