Mr King warned that inflation is likely to rise by between 4pc and 5pc over the next few months, before falling back next year. He said that inflation has risen to its current level of 3.7pc because of rising import and energy prices and taxes, and that these factors have squeezed real take-home pay by around 12pc.
In a speech in Newcastle that referenced both Ken Dodd and Leo Tolstoy, Mr King said that the shock 0.5pc fall in GDP over the fourth quarter of 2010 serves as a reminder of his comment last year that the recovery will be “choppy”.
However, he added: “Of more immediate concern to the MPC is that we are experiencing uncomfortably high inflation.”
The Governor said that there is much “unhappiness” focused on the high rate of inflation. However, he said that there was a “misapprehension” in some quarters that the MPC “could have prevented the squeeze in living standards by raising interest rates over the past year to bring inflation below its present level”.
“That view is a misunderstanding of how monetary policy works,” he said ( AtW's comment: oh ffs, you keep rates at effective negative and think THATS THE MONETARY POLICY? No, it's not actually - it's called "Zimbabwe Printing Money Policy". ). He said that if the MPC had raised interest rates significantly then “inflation might well have started to fall back this year, but only because the recovery would have been slower, unemployment higher and average earnings rising even more slowly than now. The erosion of living standards would have been even greater."
More of this tulip from the: MPC more concerned with inflation than GDP fall, says Bank of England Governor Mervyn King - Telegraph
In a speech in Newcastle that referenced both Ken Dodd and Leo Tolstoy, Mr King said that the shock 0.5pc fall in GDP over the fourth quarter of 2010 serves as a reminder of his comment last year that the recovery will be “choppy”.
However, he added: “Of more immediate concern to the MPC is that we are experiencing uncomfortably high inflation.”
The Governor said that there is much “unhappiness” focused on the high rate of inflation. However, he said that there was a “misapprehension” in some quarters that the MPC “could have prevented the squeeze in living standards by raising interest rates over the past year to bring inflation below its present level”.
“That view is a misunderstanding of how monetary policy works,” he said ( AtW's comment: oh ffs, you keep rates at effective negative and think THATS THE MONETARY POLICY? No, it's not actually - it's called "Zimbabwe Printing Money Policy". ). He said that if the MPC had raised interest rates significantly then “inflation might well have started to fall back this year, but only because the recovery would have been slower, unemployment higher and average earnings rising even more slowly than now. The erosion of living standards would have been even greater."
More of this tulip from the: MPC more concerned with inflation than GDP fall, says Bank of England Governor Mervyn King - Telegraph
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