BoE chief economist Andy Haldane said in a speech that “inflation is the tiger whose tail central banks control”. The tiger has been “stirred” by “extraordinary events and policy actions of the past 12 months” due to the Covid crisis.
“If risks from the virus or elsewhere prove more persistent than expected, disinflationary forces could return”, he said.
“But, for me, there is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” he added. “People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely. But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”.