BoE MPC member Gertjan Vlieghe had his reappointment hearing in the parliament today. Vlieghe prepared a written response to some questions from lawmakers, which could be found here.
He noted that his own forecast for growth and inflation is “consistent with a gradually rising path of interest rates”. His central projection sees the requirement of one or two 25bps hike per year over the three year forecast period. And with that, policy rate will be closer to neutral.
Regarding global trade, Vlieghe said a significant broadening of tariffs on goods, or countries could lead to a slowdown in global trade that can hut the UK economy by “several tenths of a percent of GDP or more”. Meanwhile, a global trade war would “simultaneously reduce GDP and increase inflation via higher tariffs”. And, monetary easing would “only be appropriate” in that case if inflation effect is expected to be “short-lived”. But overall, the implication is “not straightforward:”.
