그만큼 Bank of England may need to step in with early action to deal with rising inflation if price pressures persist, one of Threadneedle Street’s policymakers have said.
Michael Saunders, one of eight members of the Bank’s monetary policy committee, said on current trends it might become appropriate “fairly soon” to rein in some of the stimulus provided to support the economy since the start of the pandemic.
In a sign of growing concern at the Bank about rising inflation, Saunders became the second MPC member within 24 hours to say he was thinking about voting to tighten policy.
Dave Ramsden, one of the Bank’s deputy governors, said on Wednesday he could see inflation – currently 2.5% – rising to 4% for a period later this year and that the conditions for tougher action could be met sooner than he had previously anticipated.
Saunders said in his speech that one course of action might be call time early on the Bank’s quantitative easing (QE) programme – the bond-buying policy that boosts the money supply.
Previously, this idea had only been backed by the Bank’s former chief economist, Andy Haldane, who has left to take over the running of the Royal Society of Arts.
“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 in order to return inflation to the 2% target on a sustained basis,” Saunders said.
“In this case, options might include curtailing the current asset purchase program – ending it in the next month or two and before the full £150bn has been purchased – and/or further monetary policy action next year.”
Saunders said the modest amount of tightening that he could envisage would still leave in place considerable stimulus and hence probably not derail economic recovery and “would be more akin to easing off the accelerator rather than applying the brakes”.
The Bank plans to expand its QE programme to £895bn but has been surprised by the economy’s growth as lockdown restrictions have been eased and the extent to which inflation has picked up.
“Activity seems to have recovered a bit faster than the central forecast in the May monetary policy report,” Saunders said.
5 월, the Bank said inflation would rise above the government’s 2% target but predicted the increase would prove temporary.
Saunders suggested some of the price pressures pushing up inflation could be longer lasting. “Price pressures in global manufactured goods reflect, 적어도 부분적으로, strong global demand for goods, including consumer goods, ICT, and plant and machinery investment,” the economist said.
“These price pressures may well have some persistent effects on UK CPI inflation, partly because of lags in the pass through to consumer prices but also because the underlying strength in demand and prices for manufactured goods may prove persistent.”
Saunders added that despite the improvement in the jobs outlook there was probably still slack in the labour market.