THE Bank of England has “chosen to accept” above-target inflation in an attempt to rebalance the economy towards exports and business investment, deputy governor Charles Bean admitted yesterday.
Keeping inflation close to its two per cent target “would have required a markedly higher level of Bank Rate and with it most probably a somewhat higher level for sterling”, Bean conceded.
Higher rates and a stronger pound would have “retarded the requisite re-balancing of the economy”, he told a business gathering in Belfast.
Bean said inflation has been pushed higher by commodity prices, a tax increase and the pound’s decline. Consumer price inflation has ballooned to 4.5 per cent, with the Bank admitting that it is likely to miss its target until 2013.
“Some on the Bank’s committee appear quite ambivalent as to whether the target is actually hit,” said Citigroup’s Michael Saunders.