Andy Haldane, the Bank of England’s chief economist has said that inflation could rise by more than expected as huge amounts of stimulus raised the chances of a quick economic bounce-back.
Speaking at a webinar on Saturday at University College London he said: “As the economic recovery gathers pace next year, it will be important that central banks remain squarely focused on their core medium-term price stability mandates.”
He focused the main part of his speech on central bank independence, Reuters first reported, but added that progress on COVID-19 vaccines offered “some economic light at the end of the long, dark tunnel of this year”.
Haldane said that there could be a swift economic recovery in the UK as well as across the globe.
“Taken together with the huge amounts of policy stimulus provided this year, this will in my view leave risks to the economic outlook more evenly balanced than for some time, including risks to inflation over the medium term,” he said.
The BOE chief economist is known for being more upbeat than his fellow interest-rate setters.
Earlier this year, as the first lockdown restrictions eased, he said that Britain’s economy was recovering faster than previously thought from the health crisis, helped by stronger than expected consumer spending.
Haldane said there were signs of a V-shaped economic recovery at the time, but warned that a surge in unemployment could knock the country off course.
At the Bank’s Monetary Policy Committee meeting in June, Haldane cast a lone vote against the BoE boosting its quantitative easing programme by £100bn ($133bn).
Britain’s most recent consumer price index showed inflation at 0.7%.
It comes just days after Rishi Sunak revealed that the UK economy is set to contract by 11.3% in 2020, the largest fall for more than 300 years, at this week’s Spending Review in the Commons.
The chancellor also said that the economy was forecast to grow by 5.5% next year and by 6.6% in 2022, but that output was not expected to return to pre-crisis levels until the last quarter of 2022.
UK debt will be equivalent to 91.9% of GDP this year and rise to 97.5% of GDP in 2025-26
In 2025, the economy will be around 3% smaller than was expected in the March Budget forecast.
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