BoE’s Vlieghe pushes back on calls for slowing monetary stimulus

A top Bank of England official pushed back on calls for the monetary authority to dial back on stimulus, arguing that inflationary pressures in the UK were transitory, while the pandemic remained a threat.
In remarks prepared for a speech at the London School of Economics, Gertjan Vlieghe said: “For all these reasons, I think it will remain appropriate to keep the current monetary stimulus in place for several quarters at least, and probably longer.”

Even when it came time to tighten policy “I suspect not much of it will be needed, given the low level of the neutral rate,” the rate-setter added.

His remarks were in line with recent policy comments from other Monetary Policy Committee members, including deputy governor, Dave Broadbent, and Jonathan Haskel.

So too, Catherine Mann, who was due to come onboard on 1 September, was on record warning against premature tightening.

Indeed, Vlieghe also said that in the next downturn he would be comfortable with taking Bank Rate down to -0.5% or even -0.75% given the likely diminishing returns from rate cuts when starting from lower levels.

Vlieghe’s last MPC meeting before leaving Bank would be that on 5 August.

Arrayed on the other side of the argument, earlier in July deputy governor Dave Ramsden and fellow MPC member Michael Saunders had said that the time to begin slowing stimulus might be near.

As of 1438 BST, the pound was rising by 0.55% against the US dollar to 1.3824.

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