Bank of England economist Andy Haldane: 'This is the most dangerous moment in monetary policy'

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Bank of England economist Andy Haldane: 'This is the most dangerous moment in monetary policy'

According to the Bank of England chief economist Andy Haldane, central bankers face the most serious moment in decades, with the risk of a 'bad mistake' if they don't act to quell the inflation.

Haldane, who's leaving this month, wrote in the New Statesman that the balance of risks shifted decisively on inflation in recent months and a central resurgence was now the major scenario for many businesses.

What is the demand? As the world emerges from lockdown, consumers eager to spend the savings of the pandemic, and companies run into supply issues, price pressures are mounting. While the most central bankers say that this phase will be permanent, Haldane said it could feed into the wage demands and become established.

'This is the most dangerous moment in monetary policy since inflation targeting was first introduced in the U.K. in 1992 and it would be a grave error to delay too long before reducing the monetary stimulus, he said.

'Waiting too long risks interest-rate rises that are bigger and faster than anybody would expect or want, he said. It runs the risk of the brakes having to be slammed to an overheating economic engine No one wins in that situation.

These comments are the latest warning of inflation in May from Haldane who was the only member of the Monetary Policy Committee to vote to reduce the bank's bond-buying target.

He has been one of the most optimistic on the United Kingdom economy, which has shrank the most in three decades 2020 and has been forecast by the BOE as having the strongest growth since 1941.

'My best guess is that the economy will move from bounce-back to boom without passing go' as cash is replenished and the fiscal trinity of animal spirits, buoyant balance sheets and fiscal pump primes combined, wrote Haldane. If central bankers wait to see the whites of this Tiger's eyes before acting, they risk running like the wind to avoid being eaten.

The article was published hours after Haldane told LBC radio that the UK economy is 'going gangbusters at the moment and BOE could need to consider turning off the monetary stimulus tap in order to keep inflation in check.

Haldane said that it is 'hard to find anything whose prices aren't moving up at the moment and it was important to stop any temporary fall in inflation from becoming embedded in it.

He added that it was important that the UK didn't get too dependent on monetary medicine: the pound rose after the comments as much as 0.2%.

More stories like this are available at bloomberg.com.

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