LONDON (MNI) – The Bank of England’s chief economist Spencer Dale
said flexibility is key in setting monetary policy and he does not know
what the future holds.
Speaking during the Bank of England Monetary Policy Committee’s
visit to the West Midlands, Dale said his “gut” belief was that he did
not know where interest rates were going, and the MPC faced a balancing
act.
In an interview with the Birmingham Post Dale was asked about the
three way split on the MPC at its October policy meeting.
“I think what we are seeing on the MPC is that reasonable people
will differ when policy discussions are so finely balanced,” Dale said.
“My key gut feeling about interest rates is that I know that I
don’t know what will happen – and anyone who believes they do know, I
would disregard them,” Dale said.
“There are factors of this recession that we have never seen before
and we have no idea how they may play out. The most important thing is
that we remain alert and ready to move in either direction. We must be
prepared to change our views as circumstances change,” Dale said.
“The big challenge for the MPC is managing a balancing act. The
picture I would paint is of a man walking a tightrope carrying a
balancing pole,” he added.
“That in itself is difficult enough but on one hand there is
inflation which is currently above target and will most likely stay
above target for the rest of the year due to things like the increase in
VAT.
“On the downside is the fact that our economy has lost around ten
per cent of the output it would have enjoyed without the recession and
while the economy is recovering we are not sure much it will be able to
fill that gap.”
–London bureau: +4420 7862 7491; email: drobinson@marketnews.com
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