Boe Chief Economist Haldane highlights 2 factors that could send inflation higher than expected
Bank of England Chief Economist Andy Haldane has made weekend comments on COVID-19 vaccines, policy stimulus, and central bank independence.
On inflation, he said it could rise by more than anticipated in the medium term due to:
- progress on developing COVID-19 vaccines
- combined with huge amounts of stimulus pumped into economies during 2020
"As the economic recovery gathers pace next year, it will be important central banks remain squarely focussed on their core medium-term price stability mandates"
Also expressed some concern on central bank independence:
- "Central bank balance sheet expansions have, for some people, blurred the distinction between monetary and fiscal policies and posed questions about central bank independence"
- some economists suggest that central banks are directly financing government spending and would find it difficult to raise interest rates when the crisis is over
Haldane is optimistic the BoE would not fall into a trap:
- BOE's operational independence and its mandatory inflation target offer "strong protection against such fiscal dominance from a legal, market and political perspective."