Bank's Besley: We will fight inflation not cut interest rate
Bank's Besley: We will fight inflation not cut interest rate
Tuesday 19th August 2008
Interest rate cuts remain unlikely as long as inflation remains high, a leading member of the Bank of England's monetary policy committee (MPC) today warned.Writing in the Sun, Tim Besley explained the Bank's primary role was to combat inflation as the rising cost of living remained a greater ill.
He wrote: "It would be easy to give in, [cut interest rates] and let inflation get out of control — that’s what happened in the 1970s.
"But it would be damaging and dangerous for the economy."
Mr Beasley added higher food and energy prices should return to normal by the end of 2009, as long as people do not demand high wage increases.
"[A return to low inflation] will only happen if people don’t chase inflationary wage increases," he wrote.
"Everyone wants to protect their living standard. But if everyone does it, prices will just go up again as businesses try to cover their higher costs.
"Then we’ll all be back to square one, but with inflation still high."
At July's meeting of the MPC, Mr Besley maintained his tough stance against inflation and voted for an interest rate increase.
He argued the Bank of England needed to increase the cost of borrowing "to keep medium-term inflation expectations anchored".
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