Weale warns Bank of England’s forecasts are too optimistic

GIVEN its recent track record of missing the inflation target, the Bank of England should take inflation threats more seriously, Bank policymaker Martin Weale said yesterday.

Weale defended his vote for increasing interest rates by 0.25 per cent.

“Continuing above-target inflation could lead to inflationary expectations becoming entrenched,” Weale told a meeting in London.

Weale added that he was pessimistic about the chances of inflation moderating as fast as the Bank forecasted in February.

There is “real risk” inflation would rise towards five per cent from its current 28-month high of 4.4 per cent, Weale said.

The dangers of overshooting the Bank’s two per cent target are more grave than the risks associated with inflation falling back below two per cent, Weale argued.