Vlieghe: "material risk...it could take several years" to return to full capacity

Vlieghe's annual report highlights (bolding our own and end of the bottom paragraph the key).

"If we set the level of economic activity just before the pandemic to 100, the economy fell sharply to around 75 by April, and rose to 83 by June. I am fairly confident that, in the months ahead, the economy will bounce back to the low or mid-90s. But that would still leave GDP 5% or more below its pre-pandemic level. For context, 5% of GDP is still a large recession worth of lost output. The amount of economic slack from those last few missing percentage points would be sufficient to keep inflation well below target. The key question for monetary policy is therefore how quickly we recover those last few percentage points"

"The longer the virus remains prevalent enough to affect patterns of consumption, investment and employment, the higher the likelihood that some sectors will not be able to return to their previous level of activity. In turn, that would imply that demand in other sectors needs to rise sufficiently to use up the resulting spare capacity in the labour force and in other inputs such as commercial property and capital equipment. Such a reorientation of the economy towards a different sectoral composition is likely to be a slower process than a scenario where each sector is able to return to its pre-pandemic size. Based on these considerations, there is a material risk in my view that it could take several years for the economy to return to full capacity and inflation to return sustainably to target, even with monetary policy at its current settings."