Bank of England deputy governor Ben Broadbent said that the UK would see “very rapid growth” over the next couple of quarters as people rush to spend after lockdown.
In an interview with the Telegraph, he said that the economy would see a boost simply from people saving less after the pandemic, let alone spending the cash they had saved during lockdown.
According to the BoE’s forecasts, people will spend about 5.0 per cent of their Covid-19 savings, though Broadbent added that it was “possible” they would spend more.
“The burden of proof it seems to me should be as to why that wouldn’t happen, rather than why it would, so I have tended to be on that more optimistic side,” Broadbent said.
Despite increasing optimism over the UK’s recovery from the pandemic due to the pace of the vaccination programme, the Bank’s policymakers have been divided over the UK’s prospects for a long-term recovery.
But Broadbent joins Andy Haldane, the BoE’s chief economist, in the optimistic camp, though he warned that a “roaring twenties” style recovery was far from assured.
He also said that there has been “less of a disinflationary effect” as households have also switched spending into other areas.
“The price rises for those hitting capacity limits are going to be bigger than the falls in prices for those seeing falls in demand,” he added.
But there would be some “bumpiness” along the way, he added, making policymakers’ job of keeping inflation on track “a little trickier”.