“Tight policy is not the right policy” on inflation, Professor Jonathan Haskel said in a speech on 19 July
During the speech at the University of Liverpool’s School of Management, Professor Jonathan Haskel, Chair in Economics at Imperial College Business School and member of the Bank of England’s Monetary Policy Committee (MPC), said inflationary pressure was a possibility, pointing to the Bank of England's surprise at the rate at which inflation has grown after the winter lockdown. However, he added that this was likely to be short-lived.
"The anticipation of an improved future might well feed into demand today and so add to inflationary pressure. But much of inflation will be high temporarily due to the low base from which prices are rising,” he said.
Professor Haskel also pointed to the fact that the economy has not yet recovered from the effects of the pandemic. He noted the threat of the Delta variant of coronavirus (COVID-19) and diminishing support from government schemes, such as employment schemes, loan schemes, tax relief and insolvency and eviction protections.
“The economy... faces two headwinds over the coming months: the highly transmissible Delta variant and a tightening of the fiscal stance. Against this backdrop, risk-management considerations lean against a pre-emptive tightening of monetary policy until we can be more sure the economy is recovering in a manner consistent with the sustained achievement of the inflation target. For now, tight policy is not the right policy."
Much of inflation will be high temporarily due to the low base from which prices are rising
He highlighted that many of the government schemes only recently came to an end, with more due to expire in the autumn, including the furlough scheme, the self-employed support scheme and the £20 Universal Credit uplift.
In June, Professor Haskel was reappointed to the MPC, an independent body responsible for making decisions about the operation of monetary policy, for a second term. It also comprises of the Governor of the Bank of England, the three Deputy Governors, one member of the Bank with responsibility for monetary policy and four external members who are appointed by the Chancellor. External members may serve up to two three-year terms on the MPC.
Commenting on this year’s appointments to the MPC, Chancellor of the Exchequer Rishi Sunak said: “I am also delighted to reappoint Professor Jonathan Haskel to the MPC and I am confident his expertise in productivity and innovation will continue to play an important role.”
Click here for Professor Haskel's full speech