LONDON (Reuters) - Bank of England Chief Economist Andy Haldane said inflation could rise by more than expected as progress on COVID-19 vaccines and huge amounts of stimulus raised the chances of a swift economic bounce-back.
"As the economic recovery gathers pace next year, it will be important central banks remain squarely focussed on their core medium-term price stability mandates," Haldane said in a speech to a University College London webinar on Saturday.
Haldane has consistently sounded more upbeat than his fellow interest-rate setters about the prospects for an economic recovery in Britain after the record 25% slump triggered by the first coronavirus lockdown in the spring.
The BoE's nine-member Monetary Policy Committee has stressed that it will not be in a hurry to tighten monetary policy by saying it first wanted to see clear evidence of "significant progress" to hitting its 2% inflation target sustainably.
Haldane said recent news of progress with the development of COVID-19 vaccines "offers some economic light at the end of the long, dark tunnel of this year" and there could be a rapid economic recovery in Britain and globally.
"Taken together with the huge amounts of policy stimulus provided this year, this will in my view leave risks to the economic outlook more evenly balanced than for some time, including risks to inflation over the medium term," he said.
Britain's most recent consumer price index showed inflation at 0.7%.
Haldane focused most of his speech on central bank independence and said the blurring of the distinction in some people's minds between governments and central banks had been reflected partly in a fall in public trust in central banks.
"These developments underscore the crucial importance of efforts to improve public understanding of the economy, financial system and build trust in central banks’ role in supporting both," he said.