Inflation ‘could prevent aggressive BoE policies’
City Index May 20, 2013 5:15 PM
<p>A leading economic consultancy firm has warned high inflation may restrict new Bank of England governor Mark Carney when he takes over on July 1st.</p>
Incoming Bank of England (BoE) governor Mark Carney may find that consistently high inflation prevents him implementing the aggressive monetary policies he is expected to favour in an attempt to boost the ailing UK economy.
That is according to the Ernst & Young ITEM Club, a leading economic consultancy organisation.
The BoE last week forecast inflation would fall to its two per cent target in the early stages of 2015, but ITEM insists it will be closer to 2.6 per cent throughout that year.
Carl Astorri, ITEM’s senior economic adviser, said: "As well as becoming a risk to the MPC’s [Monetary Policy Committee's] credibility, persistent levels of high inflation may tie their hands when it comes to creating a more flexible system."
Mr Carney replaces Sir Mervyn King from July 1st and is expected to attempt to alter the BoE's monetary policy dramatically. In its last policy meeting, the central bank left interest rates at their current record low and opted not to increase its quantiative easing programme.
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