Bailey gives cautious endorsement of ‘coiled spring’ recovery and dampens inflation fears
The Governor of the Bank of England has backed the economy to recover this year and cautiously endorsed his Chief Economist Andy Haldane’s prediction of a “coiled spring” recovery.
Andrew Bailey told the BBC this morning that though current Bank forecasts predict a gradual recovery, there were welcome “risks to the upside.”
Haldane has said previously that household savings acrrued during the pandemic are likely to be spent once lockdown ends.
The Bank forecasts five per cent of those savings will be spent. However, Bailey this morning admitted it “could be more” and said the current projections were on the “cautious” end of the scale.
Bailey also confirmed he believes the economy at the end of 2021 will be “where it was at the end of 2019,” ahead of original expectations.
Inflation fears eased
Bailey also knocked back fears of a four to five per cent rise in inflation, stating that the BoE believes it will instead get back towards its two per cent target.
“I would expect it will pick up reasonably quickly towards that target in the next two months.”
Bailey also dampened expectations of any imminent rise in inflation rates.
“We will need to see evidence that the trend of inflation is sustainable because of the size of the Covid shock,” he said of the Bank’s Monetary Policy Committee.
“That is not something we have on our forecast (four to five per cent rise), we have not seen the evidence of that.”