COVID had less inflation impact than expected - BoE's Broadbent

Reuters reports that Bank of England Deputy Governor Ben Broadbent said that Britain's coronavirus pandemic is likely to have limited long-run impact on inflation, and has led to less short-term downward pressure on prices than might have been expected from the slump in headline economic output.

Broadbent said the smaller slowdown in inflation reflected shifts in consumer demand during the pandemic that had led to temporary capacity constraints in businesses, as well as support to household incomes from government furlough schemes.

Broadbent focused on the big gap between the historic fall in British economic output last year - which he said was on track to be the biggest since quarterly records began in 1920 - and a counterintuitive rise in retail spending.

Many households' incomes had been supported by government furlough programmes, and some spending on entertainment had shifted instead to audiovisual goods for people to enjoy at home, Broadbent said.

Unemployment and other labour market developments were likely to offer a better guide to medium-term inflation pressures, Broadbent said.