BoE policymaker Gertjan Vlieghe said in a speech that, his central scenario for the economy sees “somewhat more slack” that the MPC’s central projection. He worried that “the transition out of furlough does involve a modest rise in the unemployment rate”. But even in that case, “the first rise in Bank Rate is likely to become appropriate only well into next year, with some modest further tightening thereafter.”
On the upside, “the transition out of furlough happen more smoothly” with unemployment at or at little below current levels by year end, and with associated signs of upward inflation and wage pressure beyond the temporary and base effect. Then, “a somewhat earlier rise in Bank Rate would be appropriate”.
Still, “It would probably take until the first quarter of next year to have a clear view of the post-furlough unemployment and wage dynamics, so a rise in Bank Rate could be appropriate soon after, along a slightly steeper path than in my central case.”
