Thursday, February 7th 2013 - 19:32 UTC

Bank of England next governor favours “flexible inflation targeting”

Bank of England has chosen not to inject any more money into the economy, leaving its quantitative easing (QE) programme at £375bn. The Bank also left interest rates unchanged at 0.5%.

Mark Carney has said he is open to reviewing the UK's monetary policy framework.

Incoming Bank governor Canadian born Mark Carneynk  has said he is open to reviewing the UK's monetary policy framework. The Bank of England sets interest rates to achieve a certain level of inflation, but some believe its remit should include focusing on growth.

The Bank has a 2% target for inflation on the consumer prices index (CPI) measure, and has leeway of one percentage point either side of that.

Mr Carney, who replaces Sir Mervyn King in July, told a panel of MPs on Thursday: “Flexible inflation targeting, in my opinion, is the most successful monetary policy framework that has been in existence. And so the bar for change to that framework, the overall framework, is very high.

”But I would note that there seems to be an appetite for some debate about what exactly the framework is, and what alternatives could be to it, and that should be encouraged.”

On Wednesday, the Organisation for Economic Co-operation and Development (OECD) said the Bank should consider injecting more money into the economy if growth remains weak. However, some policymakers have questioned the effectiveness of QE - which involves the central bank pumping billions of pounds into the financial system, creating money to buy back government bonds.

The UK economy shrank by 0.3% in the final three months of 2012, and the Bank of England's Monetary Policy Committee (MPC) said it had taken that into account at its most recent meeting.

“The committee discussed the appropriate policy response to the combination of the weakness in the economy and the prospect of a further prolonged period of above-target inflation,” it said in a statement.

“It agreed that, as long as domestic cost and price pressures remained consistent with inflation returning to the target in the medium term, it was appropriate to look through the temporary, albeit protracted, period of above-target inflation.”

Inflation has remained above the Bank's 2% target since the end of 2009.

The Bank added: “The MPC remit is to deliver price stability, but to do so in a way that avoids undesirable volatility in output. The committee judged that its policy stance was fully consistent with that remit.

”The committee agreed that it stood ready to provide additional monetary stimulus if warranted by the outlook for growth and inflation.”

The National Institute for Economic and Social Research (Niesr) estimates that UK economic output was unchanged in the three months to January. Niesr, which correctly predicted the 0.3% fall in output in the three months to December, expects annual growth of 0.7% this year and 1.5% in 2014.

6 comments Feed

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1 briton (#) Feb 07th, 2013 - 07:52 pm Report abuse
lets wait for a couple of months, and see how it goes,
2 Trunce (#) Feb 07th, 2013 - 08:42 pm Report abuse
Advice should be sought from the colony Espanargia - experts in flexible inflation.
3 The Cestrian (#) Feb 07th, 2013 - 10:28 pm Report abuse
It'll be interesting too see how he does. He comes with a big reputation but then again a friend of the NWO and the Illuminatii always do.
4 Fido Dido (#) Feb 08th, 2013 - 05:13 am Report abuse
Mark Carneynk DOES NOT and WON'T work for the people in the UK. What he is saying is clear, KEEP PRINTING. It did NOT work last time, it won't work again. The UK economy keeps shrinking unless you LET THE ZOMBIE BANKS DIE (capitalism, real capitalism).

The UK (just like the US) is already facing higher inflation while still asleep. Great example of the (stealth) inflation is horse meat (which is cheap) for a burger with the same price as what you were paying for the burger with beef. You get it? He wants MORE inflation...good luck!
5 DanyBerger (#) Feb 08th, 2013 - 07:23 am Report abuse
Ha ha ha ha

The idiot will get 20% inflation in the end of a year because they are broke and must keep borrowing to keep falling UK economy a float.

The idiot cannot see that there is way out of UK mess without admit that all their bank system cannot survive. They don't even have declare how much toxic asset they got and they are using public money to clean the balance sheet.

So all the money injected by UK govt. goes to banks to create illusionary profits to clean they mess meanwhile people remain naked.
6 Britworker (#) Feb 08th, 2013 - 03:16 pm Report abuse
Watch, wait and see. You shouldn't allow your hatred of the UK cloud your judgement. Throughout our history we have gone through good times and bad times, but despite everything we are still the sixth largest economy in the world and have a navy whose global reach is only second to that of the US. This while we are going through a very bad time currently. We are a tiny island in the North Sea, yet we punch massively over our weight and always have done.
The pheonix will rise from the ashes again.

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