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Bailey: Will Watch Excess Demand "Extremely Carefully"

BOE

Q: The forecasts predict that with such rapid demand growth, there is excess demand by end-2021. People will be worried about inflation, but the BoE says this excess demand is temporary. What makes you sure of this and how will you judge if you are right about this in real time?

  • A (Bailey): Part of it is the result of the path of policy and the rebound in growth. That lies behind the inflation forecast as well. But we will watch it extremely carefully. There are important uncertainties about the path of supply and demand.
  • A (Broadbent): There is a temporary boost from the overall profile of the deficit and the other is the specifics of the investment tax credit which ahs the effect of bringing forward investment that would have occurred later. These are two material and identifiable things to believe that some of what we will see over the next year will be temporary.
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