–Departing Rate-Setter See Inflation Above 2% By Year End
LONDON (MaceNews) – The Bank of England’s chief economist amplified his calls for a slowdown in monetary support for the UK economy, predicting that inflation could top 2% by the end of 2021.
“With the economy bouncing back, and with inflation risks on the rise, now is the time to start tightening the tap to avoid the risk of a future inflationary flood,” wrote Andy Haldane in an opinion piece for Thursday’s edition of The Daily Mail.
Haldane has been warning of the risks of inflation since February and was the only member of the Bank’s Monetary Policy Committee to support reducing the size of the BoE’s emergency quantitative easing programme at a rate-setting meeting last week.
“By the end of this year, inflation is likely to be above its 2% target, largely due to the temporary effects of higher energy prices.” MPC members have acknowledged the risks of inflation exceeding target in 2021, but the BoE’s central forecast envisions inflation falling back below 2% within two years.
Assuming “health and employment risks remain low,” households “will be encouraged to put even more of their savings to work,” said Haldane, predicting “double-digit” and G7-leading growth “a year from now.”
UK gross domestic product contracted by 1.5% in the first quarter, according to data released on Wednesday, lagging the performance of the U.S. and the eurozone over the same period. But output rebounded by 2.1% between February and March, lifted by a surge in wholesale and retail trade.
Haldane will leave the Bank of England after the next MPC meeting on June 24th. By the time the committee reconvenes, rate setters will be in possession of April GDP data, along with inflation and retail data stretching through April.
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Contact this reporter: laurie@macenews.com.
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