NIESR Says Bank of England Acting Too Timidly on Inflation
Analysts at NIESR believe the Bank of England is reacting too cautiously to inflation, which could lead to high interest rates being maintained for a longer period.
The National Institute of Economic and Social Research (NIESR) said the Bank of England is responding too timidly to inflation. According to the institute's analysts, this caution creates a risk that interest rates will remain high for longer than expected.
The Bank of England raised rates last week, but, according to NIESR's assessment, did so without due decisiveness. The institute believes this approach will not be sufficiently effective in restraining price growth. The criticism is aimed specifically at the regulator's tactics in fighting inflation, rather than at the fact of the rate increase itself.
According to forecasts presented in the materials, inflation in the United Kingdom will remain above the Bank of England's 2% target until roughly 2030. This means that a prolonged period of high prices may be accompanied by an extended period of expensive credit for households and businesses.
A separate report also indicates that decisions on monetary and fiscal policy are being delayed. The authors of this report note that such a delay may aggravate the problem, since inflationary pressure is not receiving a timely and coordinated response from the authorities.
Thus, the debate over the Bank of England's actions centers on balancing caution with the need to bring inflation back to its target more quickly. NIESR's position adds to this discussion the argument that excessive hesitation by the regulator could cost the economy more than more decisive steps.
Source: theguardian.com
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