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BoE’s Tucker sees inflation accelerating
12.09.08
Bank of England interest-rate setter Paul Tucker today forecast yet further rises in inflation, in what was seen as a warning against cutting rates too early.
He said he expected annual inflation to rise above the current level of 4.4%, but said the economic slowdown would eventually head off the threat.
However, he warned against allowing inflation to get out of control.
"Inflation is just the opposite of a free lunch," he said.
"If, in the interests of sustaining growth in the short run, we were to let inflation become established at higher levels, things could easily get out of control as higher medium-term inflation expectations would become embedded.
"We would then find it much harder to bring inflation back to target, and could well end up having to generate a serious recession to put the genie back in the bottle.
"The experience of the 30 years before the current regime demonstrated the economic and social costs — to households, livelihoods and businesses — of what that entails," he said.
