BIRMINGHAM: The Bank of England (BoE) may have more scope to boost the economy after Mark Carney starts as governor because of tentative signs of lower inflation ahead, a member of its policymaking body said yesterday.
Finance minister George Osborne has Canadian Mark Carney, who starts as the next governor in July, the task of reviewing whether Britain should give more detailed guidance on future monetary policy, considered a way to help growth.
Martin Weale, who serves on the BoE’s rate-setting Monetary Policy Committee, said on Friday the central bank’s ability to support demand had recently been constrained by its need to keep public confidence in its commitment to get inflation back to 2 percent.
Inflation has exceeded its target for most of the past five years, something Weale said made him — and the majority of the MPC —reluctant to approve more economy-stimulating bond purchases.
“Failure to damp sufficiently any new shock pushing up on inflation would result in inflation expectations becoming more entrenched. That, in my view, limits the scope we have to support demand at the current juncture,” Weale said in a speech.
However, things may be starting to change. Earlier this week the central bank forecast inflation would fall faster than it predicted three months ago and that growth this year would be a shade higher. “The situation does look as though it is getting rather better at the moment, both in terms of what looks like an improving growth outlook and possibly ... inflation pressures may be somewhat weaker than they have been,” Weale said.
Reuters
