BOE’s Vlieghe: Priority is to Return Economy to pre-Virus Path ASAP

23 April, 2020

By David Barwick – LONDON (EconoStream) – The current priority for monetary policy has to be getting the economy back to the path it was on prior to the pandemic, Gertjan Vlieghe, external member of the Bank of England’s Monetary Policy Committee, said on Thursday. At an online webinar, Vlieghe, according to a text of his remarks made available by the BOE, said that it remained monetary policy’s ultimate goal to provide for price stability by guiding aggregate demand along a trajectory consistent with economic potential. Although the pandemic has “severely disrupted” potential growth, he said, an end to the pandemic should “in principle” imply a return to the path followed previously. “A persistent undershoot of the economy relative to its pre-virus trajectory is, in my view, most likely to be disinflationary,” he said. “So the current priority for monetary policy, with a lot of help from fiscal policy, is to return the economy to that pre-virus trajectory as soon as possible.” Vlieghe affirmed that “the MPC stands ready to take further action to support the economy consistent with its remit.” He called the ongoing contraction “faster and deeper than anything we have seen in the past century, or possibly several centuries.”