BoE's Ramsden says there is still real uncertainty as to what path the economy will take, he can envisage the conditions for considering tightening being met somewhat sooner than he had previously expected

• He puts more weight on his inflationary than disinflationary scenario


• There should be no presumption that the recent strength in demand and inflation will be sustained


• Agrees with the MPC assessment on transitory inflation


• While he puts less weight on his disinflationary scenario, it is too early to rule it out


• It is important to stress here that transitory does not mean here today gone tomorrow


• Will monitor closely if transitory increase in inflation and wages generates expectations of a more sustained rise in inflation


• As of now the near term strength in UK inflation is expected to be transitory


• As and when conditions for considering tightening are met there is also the question of how we might tighten policy


• How rapidly the balance of sectoral demand and supply adjusts will be one factor that determines how quickly inflation returns to target


• choosing the precise direction of travel of monetary policy is becoming less straightforward


• Inflation is already overshooting the target, and it is less clear, at least to me, that there remains a degree of spare capacity


• We could see very high inflation in certain sectors and products, such that at a whole economy level I wouldn’t be surprised to see the whole economy CPI inflation rate potentially rising as high as 4% for a period later this year, before falling back towards the 2% target


• A combination of weaker demand and easing supply pressures could see inflation falling back faster in the medium term, not just towards but potentially back below our 2% target


• There are certainly upside risks to household spending, if consumer confidence continues to rise or if households run down their accumulated aggregate savings faster than we have assumed


• It is now conceivable that the pre-Covid peak in output in 2019Q4 will be restored in the course of the current quarter, and quite possible that unemployment could peak lower than our May MPR forecast

Link to full speech

14 Jul 2021 - 18:02- Fixed IncomeData- Source: Newswires