BoE split over outlook

LONDON: The Bank of England said Britain's economic recovery was gathering pace thanks to the speed of COVID-19 vaccinations but its policymakers were split over the prospects for longer-term improvement, dampening speculation about a reversal of stimulus.

The government's tough pandemic restrictions - which will cause the economy to shrink again in early 2021 - could be lifted "somewhat more rapidly" than thought last month, the BoE said on Thursday after its March policy meeting.

Britain is on track to have given a first COVID-19 shot to half of all adults in the next few days, making it one of the fastest countries to roll out vaccines and pushing up sterling and British government bond yields this year.

Since the BoE's Monetary Policy Committee met in February, "the news on near-term economic activity had been positive, although the extent to which that news changed the medium-term outlook was less clear," the British central bank said.

"Different MPC members placed different weights on the balance of risks around the outlook."

Those differences - over whether the economy will grow too slowly or too fast and generate too much or too little inflation - have been on full show in recent weeks.

BoE Chief Economist Andy Haldane has likened the economy to a "coiled spring", with consumers primed to spend savings they have amassed while locked up at home. Speaking at an event on Thursday he said a rapid recovery was more likely than not.

Other MPC members sound much more wary as Britain also faces the drag of its new, less open, trading relationship with the European Union and the prospect of higher taxes after a short-term stimulus boost from finance minister Rishi Sunak.

Governor Andrew Bailey said on Monday that his increased optimism came "with a large dose of caution".

The disagreements were spelled out more clearly in the minutes of the March meeting than in February, ranging from the degree of spare capacity, whether demand would fuel inflation pressure during the recovery, and whether a post-pandemic recovery required a different approach to previous upturns.

The pound weakened moderately against the U.S. dollar as investors took the announcement as a sign that the BoE was in no rush to start dialling back on its stimulus programmes. British government bond yields were little changed.