BOE’s Inflation Alarm Deemed Overly-Cautious By Economists

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Bank of England policy makers are being overly-alarmist on their outlook for inflation, economists’s forecasts suggest, casting doubt on the need for a significant tightening in policy in the years ahead.

While the central bank expects inflation to hit 4% this year and slightly exceed that level in early 2022, economists surveyed by Bloomberg only see it rising to 3.3% by the end of 2021, according to a poll released Monday. It will then peak at 3.5% at the end of the first quarter of next year, the survey said.

A spike in inflation has become a concern for officials around the world as a splurge of activity as lockdown rules loosen led to shortages of workers and materials of all kinds. While most central banks expect pickup in prices to be temporary, the BOE said last week it would need to modestly tighten policy in coming years to hit its 2% target.

Still, the economist survey expect U.K. inflation to run below that goal, dipping to 1.8% by the end of 2022. The BOE’s forecast is for 2.5%. They don’t see the first rate hike until early 2023, later than the market path used by the BOE in its outlook.

– Bloomberg

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