BoE's Haskel sees no need to curb stimulus in foreseeable future

[July 19, 2021]  By William Schomberg

LONDON (Reuters) -Bank of England interest-rate setter Jonathan Haskel said reducing stimulus was not the right option for the foreseeable future, despite rising inflation, distancing himself from two colleagues who last week said tighter policy might be needed.

Professor Jonathan Haskel, who has just been appointed to the Monetary Policy Committee of the Bank of England, is seen in this undated portrait released by HM Treasury in London, Britain, May 31, 2018. Jason Alden/UK Treasury/Handout via REUTERS

"In the immediate term, the risk of a pre-emptive monetary tightening curtailing the recovery continues to outweigh the risk of a temporary period of above-target inflation," Haskel, a member of the BoE's Monetary Policy Committee, said in a speech during an event organised by the University of Liverpool.

"For the foreseeable future, in my view, tight policy isn't the right policy."

The value of sterling slipped after Haskel's comments and British government bond prices rose to a day's high.

Last week, two other MPC members said the time might be nearing for the BoE to rein in the huge stimulus programme it deployed last year to steer the British economy through the coronavirus pandemic.

Haskel said inflation was likely to exceed 3% by the end of the year - well above the BoE's 2% target - but that this would probably be fleeting due to the effect of a one-off rise in energy prices and comparing prices now with the deep economic slump of 2020.

"These pressures and erratic data readings should be temporary and therefore could be looked through," he said.

"In addition, the economy is fully not recovered yet and faces two headwinds over the coming months: the highly transmissible Delta variant and a tightening of the fiscal stance," he added.

In the longer term, the "immense support" for the economy - including a surge in public spending and tax cuts by the government, as well as the BoE's stimulus - looked like it might have averted major damage to output, Haskel said.

(Writing by William Schomberg, editing by David Milliken)

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