View all newsletters
Sign up to our newsletters

Support 110 years of independent journalism.

  1. Business
  2. Economics
10 June 2021

Exclusive: Bank of England’s chief economist warns of a “dangerous moment” for UK economy

In his New Statesman article, Andy Haldane urges the Bank of England to intervene early to ward off the threats posed by “the tiger” of inflation.

By New Statesman

The Bank of England’s chief economist Andy Haldane has warned that the UK economy is facing “the most ­dangerous moment for monetary policy” since 1992. In an article in this week’s issue of the New Statesman, Haldane explains why the bank must intervene early to ward off the threats posed by “the tiger” of inflation.

“Policy is about balancing risks and these have shifted swiftly, significantly and decisively in an upward direction since the start of the year,” Haldane writes. “This makes it a dangerous moment, not just for central bankers but for the wider economy.”

Haldane, who will step down as the bank’s chief economist this month and will become chief executive of the Royal Society for Arts in September, warns that it would be a mistake for the Bank of England to treat the aftermath of the pandemic in the same way as the aftermath of the 2008 financial crisis (when interest rates remained no higher than 0.5 per cent). A faster, steeper recovery will require a different policy response. 

“In my view this is the most ­dangerous moment for monetary policy since inflation-targeting was first introduced into the UK in 1992 after the European Exchange Rate Mechanism debacle,” he writes. “Having ­followed the global financial crisis playbook on the way in – rightly – there is a risk central banks also follow it on the way out. This would be a bad mistake. If realised, this risk would show up in monetary policy acting too late.”

Hundreds of billions of pounds have been saved by households over the past 15 months as spending in retail, hospitality, travel and other areas has been curtailed. But as Haldane explains, the consumer demand these savings will create in a newly reopened economy is not being met by businesses that have, in many cases, been forced into prolonged inactivity. The result: rising prices across the economy. Wages may rise too, as the skills shortage caused by the pandemic gives workers more bargaining power.

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU

“My best guess is that the UK economy will move from bounce-back to boom without passing ‘go’, as cash is splashed and the holy trinity of animal spirits, buoyant balance sheets and fiscal pump-priming combine”, Haldane writes. But he adds that to leave “the tiger” of inflation unchained “runs the risk of the brakes needing to be slammed on to an overheating economic engine”.

A late attempt to address inflation – “an economic handbrake turn” – could mean raising interest rates in a slowing economy, leaving households and businesses squeezed between the rising cost of spending and more expensive debt.

[Read the full article here: The beast of inflation is stalking the land again]

Content from our partners
Future proofing the NHS
Where do we get the money to fix the world's biggest problems? – with ONE
Labour's health reforms can put patients first

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU