More on Saunders views on inflation

Saunders arguements on whether inflation will be transitory:

• "The effects on YoY CPI inflation from recent and announced swings in energy prices are likely to be transitory. Unless energy prices go on rising, these effects will fade after a year or so."
• "In the labour market, some frictions that seem to be hindering the reallocation of resources may prove fairly temporary." He points to changes to self-isolation rules and the end of the furlough scheme as temporary but notes that there may be a more persistent reluctance to change jobs which will stop wage growth picking up.
• He talks a lot about the demand rotation from services to goods and how permanent that is. He points to things like transport (commuting) might not fully recover as people work from home. And spending on ICT equipment may remain strong as remote working remains enabled. While health worries, restrictions may limit demand for consumer-facing services etc.
• Goods are more imported while services domestically production, so goods affected by global cost pressures.
• "In addition, domestic cost pressures are likely to build, given the faster closing of the output gap and prospective move into excess demand late this year. These pressures could be reinforced if the upcoming period of above-target inflation lifts inflation expectations. In my view, with the current policy stance (which includes the £150bn increase in the target stock of purchased assets announced late last year), risks are tilted more to persistent above-target inflation over the next 2-3 years."