LONDON – The Bank of England is split between officials who say the time is approaching for action to fend off higher inflation and others who say the jump in prices is likely to prove temporary as Britain and other countries reopen their economies.
A third group prefers to wait for more evidence.
Below are highlights of BoE policymakers’ recent comments as they consider their next steps with their 895 billion-pound ($1.24 trillion) bond-buying programme and near-zero benchmark interest rates.
The BoE’s Monetary Policy Committee is due to announce its next policy decisions and forecasts for the economy on Aug. 5.
For an article on the BoE’s options for tightening monetary policy, click on.
DAVERAMSDEN, DEPUTYGOVERNOR (MARKETS & BANKING)
July 14: “Based on the rapid pace of developments since we published our May forecasts and the shift in the balance of risks, I can envisage those conditions for considering tightening being met somewhat sooner than I had previously expected. That reflects my current assessment that on balance I put more weight on my inflationary than my disinflationary scenario.”
July 15: “In my view, if activity and inflation indicators remain in line with recent trends and downside risks to growth and inflation do not rise significantly (and these conditions are important), then it may become appropriate fairly soon to withdraw some of the current monetary stimulus … For me, the question of whether to curtail our current asset purchase program early will be under consideration at our forthcoming meetings.”
July 19: “In the immediate term, the risk of a pre-emptive monetary tightening curtailing the recovery continues to outweigh the risk of a temporary period of above-target inflation. For the foreseeable future, in my view, tight policy isn’t the right policy.”
CATHERINEMANN, EXTERNALMEMBER (FROMSEPT. 1, 2021)
July 19: “We don’t want to repeat that (post-financial crisis underperformance) coming out of COVID. And so I think that bears on the need to not be premature in terms of tightening monetary policy.”
“The sort of metaphor has been used, and I guess it’s appropriate under the current circumstances, is to say: ‘You’ve got to wait until you see the whites of their eyes’.”
JONCUNLIFFE, DEPUTYGOVERNOR (FINANCIALSTABILITY)
July 14: “One shouldn’t expect the reopening of the economy to be smooth. This is not something that you can just close down and reopen without bumps in the way … We’re seeing a surge in demand. We’re seeing some constrictions in supply that’s driving inflation. How persistent is that (is the) clear question… We would expect some of these pressures, and we would expect transitory pressures at this stage.”
BENBROADBENT, DEPUTYGOVERNOR (MONETARYPOLICY)
July 22: “While we know it’s going to go further over the next few months, I’m not convinced that the current inflation in retail goods prices should in and of itself mean higher inflation 18-24 months ahead, the horizon more relevant for monetary policy.”
But Broadbent said he was less certain about how the pandemic had affected the ability of Britain’s labour market to respond to post-pandemic labour shortages: “I’m more uncertain about this process, and the implication for costs in aggregate, than about the transitory nature of goods-price inflation.”
July 15: “What we will have to do, again, is go through all the evidence and assess to what extent we think the sorts of things that underlie (higher inflation) are likely to be transitory … I do react somewhat to people who say ‘the Bank of England’s being casual about it’.”
GERTJANVLIEGHE, EXTERNALMEMBER (UNTILSEPT. 1, 2021)
May 27: “The first rise in Bank Rate is likely to become appropriate only well into next year, with some modest further tightening thereafter…. It would probably take until the first quarter of next year to have a clear view of the post-furlough unemployment and wage dynamics.”
April 12: “One lesson that we learned from the financial crisis is that withdrawing policy support too early can be very costly.”
“Withdrawing it too early… can lead to scarring effects on the labour market that would be very costly and slow down growth going forward.”
($1 = 0.7268 pounds)