Bank of England’s Haldane warns on inflation; bond yields move higher


Andrew Haldane, the Bank of England’s Chief Economist and Executive Director, Monetary Analysis & Statistics

Chris Ratcliffe | Bloomberg via Getty Images

U.K. bond yields rose on Friday after Bank of England Chief Economist Andy Haldane warned that inflation may become difficult to tame, prompting more assertive policy action.

In a recorded lecture published Friday, Haldane noted that there were both upside and downside risks to the inflation outlook, but cautioned that an inflationary “tiger” had awoken.

“The combined effects of unprecedentedly large shocks, and unprecedentedly high degrees of policy support, have stirred it from its slumber. In this environment, the tiger-taming act facing central banks is a difficult and dangerous one,” Haldane said.

Global markets have been jittery over the past week due to a spike in the U.S. 10-year Treasury yield, driven in part by rising expectations for inflation and economic growth as Covid-19 vaccines are rolled out and pent up consumer demand is potentially unleashed.

Earlier this week, U.S. Federal Reserve Chairman Jerome Powell sought to temper concerns that the Fed would tighten monetary policy conditions in the face of rising inflation. Powell vowed it would maintain its unprecedented accommodative stance, adopted in order to usher the economy out of the coronavirus crisis, projecting that inflation and employment would remain below target.

Haldane, considered the most hawkish member of the Bank of England’s Monetary Policy Committee (MPC), acknowledged the possibility that as vaccines are rolled out and normality returns, inflation will stabilize. He added that disinflationary forces could even return if the pandemic risks endure.

“But, for me, there is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets,” he said.

“People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely. But, for me, the greater risk at present is of central bank complacency allowing the inflationary (big) cat out of the bag.”

The yield on the British 10-year Gilt rose to 0.816% following the speech’s release, while the 5-year and 2-year Gilt rates climbed to 0.396% and 0.121% respectively.



Source link

Discover

Sponsor

Latest

Democrats could win in Georgia, that could be good for markets

Supporters listen as Democratic U.S. Senate candidate Jon Ossoff speaks at a news conference in Grant Park after the election in Atlanta, Georgia,...

Aston Martin AMR-C01 is a flashy driving simulator rig

Aston Martin has made a lot of amazing cars over the decades. But none of them have been able to be driven inside...

Black leaders share advice on how to help Black Americans succeed

kate_sept2004 | E+ | Getty ImagesIn celebration of Black History Month, CNBC Invest in You is featuring weekly stories from CNBC contributors and...

Interest rates will continue to rise, but don’t blame it all on inflation, economists say

Shoppers are seen wearing masks while shopping at a Walmart store in Bradford, Pennsylvania, July 20, 2020.Brendan McDermid | ReutersInterest rates are expected...

House panel subpoenas HHS, CDC chiefs as investigation into Covid response intensifies

President Donald Trump delivers remarks beside HHS Secretary Alex Azar and Centers for Disease Control and Prevention Director Dr. Robert Redfield during a...