United Kingdom

Bank of England's Haldane says inflation "tiger" is...

The Bank of England's Chief Economist has warned that an inflationary 'tiger' had woken up and could prove difficult to tame as the economy recovers from the COVID-19 pandemic.

In a clear break from other members of the Monetary Policy Committee (MPC) who are more relaxed about the outlook for consumer prices, Andy Haldane called inflation a 'tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months'.

Such inflationary pressures could require Britain's central bank to take action.

'People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely,' Haldane said in a speech published online. 'But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.'

In a speech published online, the Bank of England's Chief Economist Andy Haldane called inflation a 'tiger (that) has been stirred by the extraordinary events and policy actions of the past 12 months'

Haldane's comments prompted British government bond prices to fall to their lowest level in almost a year and sterling to rise as he warned that investors may not be adequately positioned for the risk of higher inflation or BoE rates.

'There is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,' Haldane said.

He pointed to the BoE's latest estimate of slack in Britain's economy, which was much smaller and likely to be less persistent than after the 2008 financial crisis, leaving less room for the economy to grow before generating price pressures.

Haldane also cited a glut of savings built by businesses and households during the pandemic that could be unleashed in the form of higher spending, as well as the government's extensive fiscal response to the pandemic and other factors.

He pointed to the BoE's latest estimate of slack in Britain's economy, which was much smaller and likely to be less persistent than after the 2008 financial crisis, leaving less room for the economy to grow before generating price pressures (stock photo)

Disinflationary forces could return if risks from COVID-19 or other sources proved more persistent than expected, he said.

But in Haldane's judgement, inflation risked overshooting the BoE's 2% target for a sustained period - in contrast to its official forecasts published early this month that showed only a very small overshoot in 2022 and early 2023.

Deputy Governor Dave Ramsden on Friday said risks to UK inflation were broadly balanced.

Football news:

Rodgers on 3-0 with West Brom: Leicester can play much better
Sorokin on the additional Euro matches in St. Petersburg: The decision should be made at the political level. While it is not accepted
Gasperini on 1-1: Atalanta should have beaten Roma
Ex-head of Loko Naumov on Nikolic: I can't fully praise him yet. There are 5 important games left
I don't think Barcelona is any better. Koeman on the fight for the La Liga title with Real Madrid, Atletico and Sevilla
Koeman on Minges: In Barca, you should always play actively. Pedri, Araujo also played below their level
Ronald Araujo: For Barca, all matches are finals. We won Getafe-this is the main thing