Andy Haldane, the Bank of England’s chief economist, who leaves the Bank after 32 years at the end of this month, has given an upbeat assessment of the strength of the bounce back here in the UK, describing the economy as ‘going gangbusters’. In a radio interview he said ‘Growth across the UK is picking up at a real rate of knots, going gangbusters actually, that’s a great thing to see, certainly outstripping growth, not just in Europe, in pretty much most of the other G7 big, advanced economies’.
However, he warned that there were growing fears that inflation could soon overshoot the BoE’s 2% target, is starting to look ‘pretty punchy’ and may become a problem. He thought ‘Two is a pretty good number, but the risk is that we might overshoot that number for longer than we planned. That is not good news. We need to avoid any temporary blip in inflation becoming embedded’. He said that ‘If both pay, and costs are picking up, inflation on the high street isn’t very far behind... that may mean that at some stage we need to start turning off the tap when it comes to the monetary policy support we have been providing over the period of the Covid crisis’. He went so far to say that ‘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’.
Last night the US Treasury sold USD38bn of 10-year notes, which went rather well to say the least. The auction stopped at 1.497% and Indirects bought 65% of the issue (well above the average of 60.2% over last 4 re-openings), while dealers took down only 15.7% (lowest since May 2016). The ratio of bids accepted for the auction stood at 2.58 times, compared with a historical average of 2.3 times.