By Laurie Laird
— Sees rise in inflation as “transitory’
LONDON (MaceNews) – The Bank of England Thursday delayed any discussion of removing monetary stimulus at its latest policy meeting, characterising the recent rise in inflation as “transitory.”
“Most” MPC members agreed that “sufficient conditions for any future tightening were not met … Policy should both lead strongly against downside risks and sure that the recovery was not undermined by premature tightening.”
However, departing Chief Economist Andy Haldane voted to reduce the current quantitative easing package by £50 billion to £825 billion for the second straight meeting. Haldane is to leave the Bank of England this month. As of 22 June, asset purchases in this round of QE hit £823 billion, according to the minutes.
The MPC did acknowledge the risk that inflation could overshoot for a more sustained period of time, after hitting a pace of 2.1% in May, exceeding the Bank’s target for the first time in nearly two years. The MPC sees wage growth rising “to close to 8%” this year, largely due to compositional effects with lower-paid workers more likely to have lost jobs during the pandemic. Total wages grew by an annual rate of 5.6% in the three months to April.
Rate setters saw “two-sided risks around” the path of inflation … It is possible that the near-term upward pressure on prices could prove larger than expected.” The Bank also admitted that “MPC members has a range of views” on the sustainability of “stronger demand growth.”
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Contact this reporter: laurie@macenews.com.
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