- Policy caught wrong-footed on inflation but may not need to become restrictive
- ‘Substantial repositioning’ of policy could be done with low risk to jobs
- Still feels much of current inflation due to supply and other pandemic shocks will ease
- Underlying inflation still well-anchored
This is an important debate and it relates to how high rates can go. Evans sounds like he’s closer to the the 2-2.50% camp than the 3.50% camp that some commentators are talking about. That’s a profound difference for the dollar and risk assets but it’s not a debate that will be settled any time this year.