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IMF urges BoE to avoid inaction bias, should prepare markets for more frequent policy moves

IMF urged BoE to “avoid inaction bias” in a statement today, despite facing “difficult trade-offs”.

“It would not be a simple matter to see through extended shifts in relative wages and prices while keeping expectations anchored,” IMF said. “It would be important to avoid inaction bias, in view of costs associated with containing second-round impacts. Careful communication would be needed to lay the groundwork with markets for potentially more frequent policy moves.”

IMF said UK economic growth will “remain strong in the near term, but so too will price pressures”. It forecasts 6.8% growth in 2021, and 5% growth in 2022. Inflation would peak at about 5.5% in the spring of 2022, then gradually return to target by early 2024.

Full statement here.

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