Interesting to listen to Bank of England governor, Andrew Bailey, on Woman's Hour this week, speaking with optimism about a bounce back in the economy as the vaccine is rolled out. Low and sustainable inflation (target 2% CPI) is a key government objective - a stable and low trend rate allows people and businesses to plan. Aggregate demand is forecast to pick up as we emerge from lockdown - how will this impact inflation? The good news seems to be that, given spare capacity in the economy, inflation is not forecast to rise above the 2% target in the near term. Interest rates should stay low, creating good conditions for growth. In the real estate housing market, we have seen further fiscal stimulus for prospective owners, through the extended SDLT holiday and the new help to buy scheme. How this will impact the thriving BTR market remains to be seen but overall it feels like the conditions for markets to spring forward are there.
Mr Bailey said the Bank expected inflation to start rising towards its 2% target in "the next two or three months". But he added that the Bank's rate-setting Monetary Policy Committee would need to see "a lot more evidence" that the inflationary trend was sustainable before acting, given the "huge uncertainty" over the economic effects of Covid.