UK | Brighter outlook raises risks of an earlier rate lift-off
At May’s MPC meeting the committee revised up its forecast for GDP growth in 2021 significantly and laid out its plans to slow the pace of asset purchases. Andrew Haldane broke ranks by voting to cut the target for QE.
A tapering of QE had already been floated by the MPC, so we don’t attach much significance to the decision. But with the economy seen to be running hotter, and unemployment peaking lower, than previously expected, the risk that monetary policy will be tightened earlier than we anticipated has increased.
What you will learn:
- The BoE now expects GDP to regain pre-Covid levels by the end of this year
- Inflation is expected to rise above the 2% target, but only temporarily
- Andrew Haldane underlined some of his recent public warnings by voting to cut back on QE
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