LONDON: Britain’s top central bank officials look set to remain divided this week over whether to pull the plug on their 875 billion-pound ($1.2 trillion) government bond purchase programme, after inflation hit its highest in nearly two years.
Bank of England chief economist Andy Haldane was alone in May when he voted to halt the quantitative easing (QE) bond purchases in August once they reached 825 billion pounds.
Economists expect Haldane to retain this stance when the BoE announces its latest policy decision on Thursday and are looking to see if others on the Monetary Policy Committee join him.
Haldane has ramped up his anti-inflation rhetoric ahead of what will be his final MPC meeting before leaving the BoE. In early June he described the policy outlook as the most dangerous since sterling dropped out of the European Exchange Rate Mechanism in 1992.
May’s consumer price inflation came in above the BoE’s and other economists’ forecasts at 2.1%, the first time it had surpassed the BoE’s 2% target since July 2019. Some economists now see inflation exceeding 3% later this year versus BoE forecasts of 2.5% for the end of 2021.
“Stronger growth, labour market and inflation data, thus far, should tilt next week’s policy statement in a slightly more hawkish direction,” Deutsche Bank economist Sanjay Raja said.
Although British inflation is below the 5% last recorded in the United States, and its post-Covid recovery is less advanced, financial markets expect the BoE to begin raising rates before the US Federal Reserve — a historically rare sequence. — Reuters
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