I enjoyed listening to the Bank of England’s chief economist Spencer Dale tonight.
Speaking at the Cardiff Business School this evening Mr Dale said that while inflation in the last 41 out of 50 months had overshot the Bank’s consumer prices index inflation target of 2%, he stressed that it was important not to forget that the current level of 3.1% was a “long, long way from the high and volatile inflation of the 1970s and 80s”.
Mr Dale, who studied economics as an undergraduate at Cardiff University said: “One of the cornerstones of our economy’s stable and consistent growth in the last 15 years or so, prior to the financial crisis, was the period of low and stable inflation that was achieved then.
“And our future prosperity will depend on our maintaining an environment of low and stable inflation.”
“Has the MPC gone soft on inflation? Is this a conspiracy with the Government to deflate away some its debt?
“The answer to both these questions is emphatically no, The MPC remains as committed as ever to meeting the inflation target.
“It is our job to achieve the target and we are accountable to Parliament for doing so. To borrow a phrase of a previous Prime Minister, ask me my three main priorities for monetary policy and I will tell you: inflation, inflation, inflation. Maintaining low and stable inflation is the best contribution that monetary policy can make to the long-term health and prosperity of our economy.”
In explaining why inflation has been above target Mr Dale said it was not difficult to find contributing factors.
He added: “The economy has been hit by a series of large price shocks – to oil and other commodity prices, to VAT and to the sterling exchange rate – which have raised companies’ costs and put upward pressure on prices. Together these factors can more than account for the strength of inflation.”