Wa-oah. The Bank of England has gone weirdly, defensively inflation target crazy.
From a speech by the Bank’s exec director and chief economist, Spencer Dale, released Tuesday afternoon:
. . . The final criticism that I want to address is that the MPC needs to articulate more clearly its exit strategy [from its asset purchase programme/quantitative easing]. This brings us back to where we started, and the importance of the inflation target. It was the outlook for inflation relative to target that dictated the speed and magnitude of the dramatic loosening in monetary policy. And likewise, it will be the outlook for inflation relative to target that will determine the rate at which the current exceptional degree of monetary stimulus is withdrawn as economic prospects recover. When the time comes, the Committee can tighten policy both by raising Bank Rate and by selling assets. A natural corollary of both actions is that yields will rise — that is what happens when policy is tightened. The most difficult issue concerning the exit strategy will be deciding the timing at which policy should begin to be tightened. Although that decision will be highly uncertain and subject to intense scrutiny, the strategy guiding the decision — and the primacy of the inflation target within that strategy — should be clear. . . .
So when inflation goes beyond the BoE’s 2 per cent target, they’ll start to tighten?
What?
Related links:
State of the art of inflation targeting – BoE handbook
Inflation stays higher than forecast – FT
Central banks must target more than just inflation – FT