Andy Haldane’s comments to the Treasury Select Committee come amid evidence of soaring prices for many consumer and manufactured goods across the UK economy.
The bank’s chief economist, who is stepping down later this summer, voted to cut the Monetary Policy Committee’s quantitative easing program earlier this month, so that his concerns about rising prices are not a surprise.
Yet they highlight the concerns of many economists about the rising cost of living, which is driven in part by the economic recovery and in part by a shortage of raw materials around the world.
Mr Haldane said: “The situation we must avoid like the plague is one where inflation expectations adjust before they do or where we wait for positive evidence that the effects on inflation are not transitory before. to act.
“Because in those two cases, it would be too little too late.
“With this unprecedented degree of peacetime fiscal and monetary stimulus injected into an economy… that’s why I reached my own judgment on why we should turn off the tap.
He also said: “It is difficult to find very many goods or assets that do not increase [in price] for now, with the dishonorable exception of bitcoin. ”
Bank Governor Andrew Bailey, however, said the recent rise in the Consumer Price Index measures inflation, which showed annual price increases. 0.7% to 1.5% in April, was no surprise, and that the bank was trying to look through an inflation “bump”.
Mr Bailey said: “In the monetary policy report, our forecast suggested that inflation… will hit the target and exceed 2.5% this year. We think then that it will come down again.
“There are some very hot spots in terms of pricing – without a doubt. They reflect certain global effects. Global commodity prices have increased, there is a global shortage of semiconductor chips.
“This is a fairly lopsided recovery, so the market demand for goods is much higher than for services.
“We have this bump in the forecast: Inflation goes up and down. We have to watch this very carefully. We have seen no sign that inflation expectations are rising worryingly. “
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While interest rates are still at 0.1% – the lowest in history – and the bank continues to create money to pump into the economy through its quantitative easing program, some fear that the Bank will wait too long to reduce its stimulus measures and control prices.
Part of the hearing of the Special Treasury Committee focused on the collapse of Greensill and the difficulties of the steel companies of Sanjeev Gupta.
Mr Bailey revealed that the Prudential Regulatory Authority – the bank’s financial regulator – was concerned about Gupta’s Wyelands Bank in 2019 and referred it to the Serious Fraud Office and the National Crime Agency.
This may raise further questions about why authorities failed to crack down on Mr. Gupta earlier.