The Bank of England should ignore the recent dip in inflation when setting interest rate policy, according to monetary policy committee (mpc) member Martin Weale, who indicated that he will continue to vote for an immediate hike in rates.
Weale said the Bank should “look through” the current low level of inflation, just as it had previously ignored periods of high inflation, and place greater weight on the speed of the recovery and falling unemployment.
Speaking at the University of Hull, the former academic warned that though economic forecasting remained inherently difficult, the tightening labour market could feed through into higher wages and rising prices by the end of 2015.
To avoid an overreaction to a pay-fuelled inflation rise in a year’s time, it was sensible to start tightening credit this year, he said.
Weale is one of two policymakers on the nine-strong monetary policy committee to vote for higher interest rates in recent months. Along with Ian McCafferty, a former CBI economist, he has voted since August to raise rates by a quarter of 1%.
via The Guardian