Sharp Rise in Inflation Will Exceed Target, Warns King
Sean O'Grady Economics Editor, The Independent (London, England)
The Governor of the Bank of England, Mervyn King, has again warned that inflation will sharply exceed the Government's target and is likely to hit 3 per cent. However, Mr King stressed that the Bank's Monetary Policy Committee, which will meet next week, face "a delicate balancing act" on deciding whether to move the base rate, currently at 5.25 per cent.
The comments, in a speech given in Jerusalem to the Bank of Israel, did little to help the pound, which slid to a fresh low against the euro of 79.66p.
Mr King also took the opportunity to call for "radical" thinking about financial regulation and, implicitly, a leading role for the Bank of England, perhaps regaining control over the "prudential" regulation of banks while the Financial Services Authority concentrates on "conduct of business".
"It is hard to imagine taking steps either to prevent, or to deal with, the consequences of a financial crisis without the active involvement of the central bank... In the longer term, it seems extremely likely that banks and other 'near' banks will be called upon to hold more capital and a greater quantity of liquid assets than hitherto," said Mr King. …