BoE MPC member Gertjan Vlieghe reiterated in a speech that the current inflation peak is “likely to be temporary”. The supply bottlenecks and base effects are “set to wane next year”.
Also, the UK is “not out of the woods yet” in terms of the virus and the impact of the economy. He added that most recent data indicated that economy remains “an average recession away from full employment”. The delta variant is “still causing health and economic damage”.
Also, various government support schemes are “coming to an end”, he said, “I would want to see how the economy copes with that, before adding monetary tightening on top of fiscal tightening”.
Hence, he said, “it will remain appropriate to keep the current monetary stimulus in place for several quarters at least, and probably longer”. “When tightening does become appropriate, I suspect not much of it will be needed, given the low level of the neutral rate.”
