By Andy Bruce
LONDON (Reuters) -Bank of England rate-setter Gertjan Vlieghe said Britain’s economy will still need help from the central bank to restore it to its pre-pandemic growth path, even with a fast recovery and some inflation this year.
Vlieghe said in an interview published on Monday that the yardstick for Britain’s economic revival should not be just a few quarters of fast growth, but a full recovery of its labour market, too.
His comments underscored how most members of the Monetary Policy Committee think that a stubborn surge in inflation is not a pressing risk as Britain recovers from its biggest economic slump in three centuries.
“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,” he told TheBusinessDesk.com, a regional business news website.
“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 played down risks of a long-term jump in inflation above the BoE’s 2% target when Britain’s economy recovers from its pandemic crash, and Tenreyro said more stimulus might yet be needed.
The most recent reading of the consumer price index showed inflation was 0.4%, but it is expected to pick up soon, in part because of the weakness of the economy last year and also due to rising global oil prices and regulated power tariffs.
Another MPC member, Jonathan Haskel, has also emphasised downside risks.
The views of Vlieghe, Saunders, Tenreyro and Haskel – the MPCs’ four external members – contrast with those 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.
(Reporting by Andy Bruce; editing by Michael Holden, Larry KingSS)
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