The MPC held firm this week, maintaining interest rates at 0.5% for the 27th consecutive month. However with inflation more than double its target rate, one does begin to wonder just what Mervyn King has in mind for the economy.
Throughout 2011, The Bank of England appears to have prioritised the stability of the financial sector above its obligation to maintain CPI at 2%.
Mervyn King and his fellow MPC members appear to have sat down one evening last December and said “You know what? Screw inflation targeting, if this country’s going to have any hope of a recovering, growth and employment must take priority over prices for the next 18 months”
Theoretically, with inflation at 4.5% in April, interest rates should have gone up this month. If all the MPC had on its mind were prices, monetary tightening would have come months ago, as it did in Europe.
The Albus Dumbledore of banking is coaxing an economy in the adolescence of its recovery towards its prosperous destiny, that is, to return to stable, sustainable growth as soon as possible. Whether this be at the expense of 7% inflation by the end of the year, is another matter.
