July 26, 2021
LONDON (Reuters) -Bank of England interest-rate setter Gertjan Vlieghe said the central bank should not scale back its stimulus possibly until well into 2022 because a recent rise in inflation is likely to be temporary and COVID-19 remains a threat for the economy.
Vlieghe also said he would want to see the impact on the economy from the government’s withdrawal of its huge pandemic support programme for the economy over the coming months, including its wage subsidy furlough scheme.
“For all these reasons, I think it will remain appropriate to keep the current monetary stimulus in place for several quarters at least, and probably longer,” Vlieghe said in a speech to the London School of Economics on Monday.
“And when tightening does become appropriate, I suspect not much of it will be needed, given the low level of the neutral rate.”
Two BoE officials – Deputy Governor Dave Ramsden and Michael Saunders – said this month the time for tighter policy might be nearing, raising the prospect of the BoE curtailing its bond-buying programme sooner than planned.
But another Monetary Policy Committee member Jonathan Haskel said last week that scaling back support for the economy was not the right option for the foreseeable future and Catherine Mann – who joins the BoE as a policymaker on Sept. 1 – warned against curbing stimulus too soon.
Comments by Deputy Governor Ben Broadbent on Thursday further diminished the prospect of an imminent move by the BoE when he said a current spike in prices was unlikely to create longer-term inflation pressures.
The BoE begins its latest monetary policy meetings later this week before announcing its decisions alongside fresh forecasts for the economy on Aug. 5.
Financial markets currently price in a first rate rise by the BoE – to 0.25% from 0.1% – by August next year.
The value of the pound edged down and British government bond prices rose after Vlieghe’s speech was published on Monday.
(Reporting by William Schomberg and Kate Holton; editing by Michael Holden)