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The British economy has not been out of trouble, and the damage caused by the Covid-19 pandemic has only been partially repaired. Bank of England Policy makers said.
Jan Vlieghe said that as the latest data show that “Freedom Day” has little impact on consumer activities, Threadneedle Street should carefully consider raising interest rates to deal with higher levels of inflation after the lock-in.
Vlieghe said that the UK is still struggling to deal with the Delta variant of the virus, and it is not clear what effect the cancellation of government support will have on the economy that is still struggling to return to pre-crisis output levels.
“As far as the virus and its impact on the economy are concerned, we are not out of trouble. Yes, the economy has been growing rapidly, but according to recent data, it is still an average recession far from full employment,” he said.
Retail analyst Springboard said that although most of the remaining legal restrictions were lifted on Monday, July 19, Britons are still cautious about returning to stores.
Compared with the same day a week ago, on the day the government lifted the mandatory wearing of masks and social distancing controls, the number of visits to retail hotspots soared by 16.5%. However, the passenger traffic for the next five days only increased by an average of 1.7%, resulting in an increase of only 3.3% in retail visits throughout the week.
Springboard said that the extremely hot weather has discouraged some shoppers, and there is evidence that consumers remain cautious due to the rising rate of coronavirus infections and the increased chance of being detected by the NHS Covid app in crowded areas.
Compared with the same period in 2019, passenger traffic fell by 23.3%, which was basically the same as the 24.9% drop in the week before the restriction was lifted.
In the context of continued caution among consumers, Vlieghe stated that the Bank of England should ignore the temporary rise in inflation, and it would be a mistake to act early to reduce the cost of living.
In the nearest one Series intervention Among the members of the central bank’s monetary policy committee in the past two weeks, Vlieghe made it clear that he would oppose raising interest rates or curtailing the quantitative easing plan when the committee meets next week.
He emphasized that even if appropriate actions are taken, the World Bank need not be too aggressive, because long-term factors—an aging population, rising debt levels, and rising inequality—are all driving down the level of interest rates needed to maintain interest rates. Inflation is under control.
Lecture at the London School of Economics Before withdrawing from the Monetary Policy Committee at the end of next month, Frieger said: “I think it is still appropriate to maintain the current monetary stimulus measures for at least a few quarters, or even longer.
“Considering the low level of neutral interest rates, when tightening does become appropriate, I doubt that much is needed.”
Vlieghe’s intervention reduced the chances of the central bank taking action on August 5. So far, only two members of the top eight MPC have publicly supported Policy tightening due to rising annual inflation rate To 2.5%.
Both Michael Saunders and Dave Ramsden provided reasons for the central bank to start withdrawing some of its stimulus measures, but Vlieghe said that although the expected peak inflation may be higher than previously expected, he still believes that this will prove temporary.
“This is driven by supply bottlenecks and base effects, both of which will weaken next year,” he said.
Although an EY Item Club forecast indicates that the growth of the UK The fastest speed in 80 yearsAccording to Vlieghe, economic output in May was 4.5% lower than the level in December 2019. The unemployment rate was 300,000 higher than before the crisis, and 1.3 million people were still on leave at the end of June.
Vlieghe said: “Delta variants are still causing health and economic damage in the UK and other parts of the world, in a way that may give back to the UK economically.”
He pointed out that various government support programs, including the vacation wage subsidy program, are coming to an end. He added: “Before monetary tightening is implemented on the basis of fiscal austerity, I want to see how the economy responds to this situation.”
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