By David Milliken
LONDON (Reuters) -The Bank of England needs independent budget forecasts to do its work, BoE policymaker Jonathan Haskel said on Thursday, as uncertainty remains over the timing of the next set of forecasts from the Office for Budget Responsibility (OBR).
UK finance minister Kwasi Kwarteng announced 45 billion pounds ($50 billion) of tax cuts on Sept. 23 without the OBR forecasts which usually accompany big fiscal changes, triggering an abrupt sell-off on bond markets that forced the BoE to intervene.
Full forecasts are not scheduled until Nov. 23, when Kwarteng is due to announce a medium-term fiscal plan, but a government source has said the date is likely to be brought forward when parliament returns next week.
BoE chief economist Huw Pill has said that the central bank is likely to need to make a “significant policy response” on Nov. 3 when its Monetary Policy Committee (MPC) announces its next rate decision, due to the medium-term stimulus from Kwarteng’s plans.
British consumer price inflation hit a 40-year high of 10.1% in July and the BoE is concerned that inflation may become entrenched.
Haskel, in remarks released by the BoE, said calibrating this response would be easier if the bank had access to new OBR estimates for public spending and tax revenues to feed into its own models of economic growth and inflation.
“A sidelined OBR generates more uncertainty by worsening everyone’s information base,” he said in remarks to be delivered to Britain’s Society of Professional Economists later on Thursday.
Haskel added that he agreed with Pill’s assessment that “there was undoubtedly a UK-specific factor” behind the recent slump in British government bond prices.
Prime Minister Liz Truss initially said the moves reflected global factors rather than a negative financial market reaction to her and Kwarteng’s plans.
Haskel said Truss’s focus on improving medium-term growth was important, and highlighted lower labour force participation since the COVID-19 pandemic as a key area to tackle.
“Given the time it takes for monetary policy to have its full impact, the MPC is focused primarily on the medium and longer-term prospects for the economy,” Haskel said.
“The MPC has the tools and resolve to return inflation to target in the medium term,” he added.
($1 = 0.8949 pounds)
(Reporting by David Milliken; editing by William James and Susan Fenton)