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Lockdown ended on 19 July; the furlough will end on 30 September. The economy is set to reach its pre-pandemic activity level, but the Bank of England’s extreme monetary accommodation appears to go on forever. It is past time for the Bank to act to bolster its credibility and to act to avoid un-anchoring inflation expectations.
The Federal Reserve underpredicted 2021’s US inflation pick-up but believes the current inflation spike is temporary. If this assessment proves wrong, the result could be lasting higher than targeted inflation, an extended period of high unemployment, or both. To avoid this economic long Covid, the Fed should taper soon to give itself the flexibility to respond with higher rates if inflation fails to retreat as much as it expects.