Martin Weale is a member of the Bank of England’s rate setting committee
telegraph.co.uk / By Philip Aldrick / May 17, 2013, 2:44PM BS
Martin Weale, a member of the rate-setting Monetary Policy Committee, warned that more stimulus risked a damaging surge in inflation because price rises have already been higher than the Bank’s 2pc target for most of the past four years. The persistent overshoot, he said, “is a constraint on my freedom of action”.
“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,” he told the British-American Business Council Transatlantic Conference in Birmingham.
George Osborne appointed Mr Carney on a ticket of “monetary activism” to help boost growth. The Chancellor has also asked the MPC to investigate how it might use “forward guidance” as an additional tool. But Mr Weale, who has been sceptical about the policy, suggested there is little it can achieve.
He indicated that the committee’s current stance has effectively provided “guidance” by accepting the market’s forecast for interest rates to remain at 0.5pc until late 2016. “The point is not that it is the market’s view, but rather that the MPC has concluded that this implied path for the Bank Rate is consistent with its remit, at least in current circumstances,” he said.
Simon Hayes, UK economist at Barclays, added: “Mr Weale seems to be unconvinced of the value of going further than this when communicating the policy outlook.”
Thanks to BrotherJohnF