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Mark Gilbert

Even Central Bankers Can't Agree on Reflation

A difference of opinion among Bank of England policy makers should give gilt investors pause. 

Even reasonable people can disagree.

Even reasonable people can disagree.

Photographer: Hollie Adams/Bloomberg

Investors are betting that as vaccines cure the pandemic, the recovery in growth will be fast and straightforward. That optimism, with the built-in assumption that prices are bound to recover too, has sent bond yields up around the globe. But two recent speeches by policy makers at the Bank of England, and their flagrant disagreement over the outlook for inflation, should give bondholders pause.

Monetary Policy Committee member Gertjan Vlieghe said on Feb. 22 that “tightening too soon would be a worse mistake than tightening too late.” Four days later, fellow rate-setter Andrew Haldane begged to differ. “For me, there is a tangible risk inflation proves more difficult to tame, requiring monetary policy makers to act more assertively than is currently priced into financial markets,” he said. They can’t both be right.