LONDON, Sept 2 (Reuters) - Bank of England Deputy Governor Dave Ramsden and another interest-rate setter, Gertjan Vlieghe, warned on Wednesday of risks that Britain’s economy could suffer more damage than spelt out by the central bank last month.
Ramsden told lawmakers that the BoE had estimated the level of Britain’s economic output would permanently be about 1.5 percentage points lower than it would have been without the pandemic.
“For me all the risks are really that that number will be greater than 1.5%,” Ramsden said.
Vlieghe said there was “a material risk” that it could take several years for Britain’s economy to return to full capacity after its coronavirus shock.
The BoE said in August it expected Britain’s economy to recover its pre-COVID-19 size by the end of next year.
Governor Andrew Bailey told the lawmakers that inflation might not be as weak as estimated by the BoE last month, citing evidence that many businesses had not passed a value-added tax cut on to customers as much as had been expected.
“So that will tend to cause short-run inflation to be higher than we thought it would be, and it probably won’t now go negative.”
Reporting by Andy Bruce, Kate Holton and Estelle ShirbonWriting by William Schomberg