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LONDON, May 17 (Reuters) - Sharp economic growth in Britain
this year should not be confused with a normal boom, given the
amount of ground lost last year during the coronavirus pandemic,
Bank of England policymaker Gertjan Vlieghe said on Monday.
Vlieghe reiterated BoE forecasts that inflation was likely
to overshoot its 2% target later this year, due to temporary
bottlenecks and base effects, but stressed the BoE would look to
the medium term when setting interest rates.
"The fact that we're going to have, or we're likely to have,
temporarily high growth rates and temporarily high inflation in
the coming months, is not the main concern of monetary policy,"
Vlieghe said at an event hosted by King's College London's Qatar
Centre for Global Banking and Finance.
"Instead, monetary policy will focus on returning to
inflation sustainably to its target, which requires focusing on
the medium term outlook," he added.
Britain's economy shrank almost 10% last year, its biggest
slump in more than 300 years, but official unemployment has
barely risen due to a government furlough programme.
Vlieghe said the economy would need to grow very rapidly
over the coming months to absorb the millions of workers whose
furlough payments are scheduled to end by Sept. 30.
This week British pubs and restaurants can resume serving
customers indoors for the first time in months. But Prime
Minister Boris Johnson warned last week that a new Indian
variant of COVID could derail plans for a full lifting of
restrictions planned for late June.
Vlieghe said he still believed that quantitative easing bond
purchases were likely to offer only limited economic stimulus
while long-term interest rates remained very low. Instead, he
welcomed the fact the BoE would soon be able to cut interest
rates below zero if needed.
Vlieghe's term as an external member of the Bank of
England's Monetary Policy Committee expires on Aug. 31.
(Reporting by David Milliken, editing by Andy Bruce)