BoE’s Chief Wonk: Inflation spike could undermine recovery
The Bank of England’s Chief Economist Andy Haldane has said that a “laser focus” is needed on inflation amid unprecedented public debt and fiscal stimulus.
Haldane fears that markets would only forgive a brief period in which inflation tops the Bank’s 2 per cent target, with any entrenchment seeing yields rise and increasing the cost of public debt significantly.
Read more: UK monthly borrowing hits third-highest ever level in November
“The last thing the world needs right now is a nasty inflation surprise,” he told a Bloomberg podcast.
Earlier he had said that the Chancellor Rishi Sunak needed to keep the “insurance policy” of higher spending, particularly focused on avoiding unemployment, until the recovery is well underway.
He told the Guardian that there was a risk unemployment, even temporarily during the Covid-19 crisis, could quickly become a longer-term condition in certain parts of the country.
“If we are not careful those unemployment problems can become sticky. What we found from the 1980s experience is that they can become generational. It is passed down the generations and you have whole families without work,” he said.
“I am very pleased we have learned those lessons.”
Haldane said he was “more confident” about the second half of 2021 than the first.
“The further you peer into the future right now, the clearer things are becoming now in the light of the vaccine,” he said.
That “should be encouraging.”
Read more: Is 2021 going to be the FTSE’s year?