2 19 issue of The issue of the British in front of a Hamlet-like problems. Tight monetary policies implemented too quickly or too much, the economic recovery instant turn to ashes, but if too late, already high inflation may be out of control.
the past many years --- the Bank of England Bank of England's Monetary Policy Committee (MP C) work seems always to go straight, leading to economic standstill impact are those often made to maintain the downward trend of inflation. Weak economic growth means interest rates, and indicates the strong recovery rate hikes coming. But the monetary policy-makers clearly do not always so simple, economic output and inflation may also be the opposite. Surprise is that they now face the grim situation, but over the years have not encountered a dilemma.
2 announced on the 15th of the data showed UK inflation rate reached 4% in January, the Bank of England set a target (2%) twice. According to the day after the Bank of England's quarterly inflation report, the British domestic inflation in the coming months may continue to climb, reaching 4.5% or even higher. The report seems certain people for the Bank of England as early as May rate hike expectations, and interest rates will rise. Based on the forecast financial markets, the UK base rate will end in 2013 to 3%.
but the Bank of England Governor Mervyn King said the report should not be interpreted as a prelude to the interest rate will rapidly increase. He said the timing and speed of policy adjustment is not based on market expectations, but the Monetary Policy Committee to look at how to balance the risks, it is necessary to take into account the side of inflation continued to rise, but also take care of the economy remains weak Under the sudden decline of inflation on the other side.
Currently, the Bank of England faced a difficult problem: the majority of current caused by higher short-term factors of inflation over the Bank of England's ability to control, such as energy and food prices soaring, Another example is the VAT rate increase and the subsequent devaluation of sterling. Unless British companies and employers began to add to inflation the prices of goods and services into and begin to improve remuneration paid, or by the above factors pushing up the inflation rate will gradually decline. Interest rates, may reduce the spiraling trend of prices a possibility, but will also injure the already fragile UK economy weak.
The question is, not everyone is a mind and central bank governors. Although Mervyn King are all trying to put the blame on higher prices short-term factors, but some of his colleagues are at odds. Two committee members voted in favor of the conduct of the January rate hike. Osborne in a letter to a Chancellor of the Exchequer to explain why prices continued to rise in the letter, Mervyn King admitted that serious differences within the Commission, suggesting that the faction in favor of rate hikes is growing.
round of the international financial crisis as an important legacy of the monetary policy decision-making dilemma is testing the wisdom of the Central Bank of the developed countries. Since the main objective is to maintain price stability, the Bank of England does not seem much room for maneuvers. Keynes once said that he hoped one day to become a humble economist, senior technicians, the same as dentists. Mervyn King on the run, for now, tooth extraction may be a more promising career.
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