BOE’s Tenreyro: Inflation Pick-Up Likely Due to One-Off Effects Not Sustainable

26 March, 2021

budget, she said, ‘but a key influence on the outlook will be the extension of the furlough scheme until the end of the third quarter, when all UK adults are expected to have been offered a vaccine.’

This reduces the risk that joblessness will surge when the furlough scheme comes to an end as well as the risk of hysteresis in the job market, she said.

Meanwhile, the latest U.S fiscal stimulus ‘also raises the global and UK outlook, given the importance of the U.S. to the world economy and as a major UK trading partner’, she said, with a positive net impact on the UK economy.

Although there are fiscal policy differences between the U.S. and UK, Tenreyro said she did ‘not see a major divergence in long-term inflation risks across countries: monetary policymakers have the tools to contain and manage those risks, and would not hesitate to use them.’

UK fiscal measures promoting investment will impact demand, she said, but would also boost future supply, ‘which may temper or reverse any inflationary pressures.’ The timing – including near-term stimulus but consolidation further out – ‘would lead to a hump-shaped impact on demand’, she said.