By Andy Bruce
Bank of England rate-setter Gertjan Vlieghe said that “the UK economy will continue to need help from the central bank to restore its pre-pandemic growth path, even with a rapid recovery and some inflation this year.”
Vlieghe said in an interview Published Monday that the criterion for the UK’s economic recovery should be not just a few quarters of rapid growth, but also a full recovery in the labor market.
His comments underscored how most members of the Monetary Policy Committee believe that a stubborn surge in inflation is not an urgent risk as Britain recovers from its worst economic recession in three centuries.
He told TheBusinessDesk.com, a regional business news website that “My main message is don’t think of the Bank Rate being linked to short-term growth in the economy, as that’s not enough.”
“Just because we’re going to have a couple of quarters of growth rates that may be unprecedented doesn’t mean the Bank of England should change its monetary stance and step on the brakes because everything is ‘great now’,” he said.
Echoing comments made by fellow MPC member Silvana Tenreyro and Michael Saunders on Friday, Vlieghe – who is due to leave the Monetary Policy Committee at the end of August – said inflation was bound to rise this year.
But he warned that one-off rises should not be mistaken for sustained price pressure.
“To my mind, seeing some strength this year, which I do expect, is not going to be nearly enough to then conclude this is an economy that doesn’t need monetary help anymore,” he said.
Saunders and Tenreyro on Friday understated dangers of a long-time period bounce in inflation above the BoE’s 2% goal when UK economy recovers from its pandemic crash, and Tenreyro stated extra stimulus may yet be needed.
The latest reading of the consumer price index confirmed inflation became 0.4%, however it’s far predicted to choose up soon, in part due to the weakness of the economy last year and additionally because of growing worldwide oil prices and regulated power tariffs.
Another MPC member, Jonathan Haskel, has too emphasized downside risks.
The perspectives of Vlieghe, Saunders, Tenreyro and Haskel – the MPCs’ four external members – contrast with the ones of BoE Chief Economist Andy Haldane, who has warned of an inflationary “tiger” fuelled by the release of household and corporate savings built up during the pandemic and government spending.