Printing ‘too much money’ fuelled high inflation, blasts former Bank of England Governor Mervyn King
The Bank of England came under fresh fire yesterday for failing to tackle inflation.
Former governor Lord King said the central bank printed ‘too much money’ during the pandemic through quantitative easing – pushing prices higher.
And David Miles, a former member of the Bank’s monetary policy committee who now works for the Government’s budget watchdog, said it was a ‘mistake’ not to get to grips with inflation earlier.
Former governor Lord King said the central bank printed ‘too much money’ during the pandemic through quantitative easing – pushing prices higher
Despite inflation rising above the 2 per cent target in May 2021, the Bank did not start hiking interest rates until December.
Inflation is now at a 41-year high of 11.1 per cent despite rates rising from 0.1 per cent to 3 per cent.
Referring to the impact of the pandemic on economic output, King said: ‘Covid gave us too few goods.
And central banks gave us too much money. And so we have too much money chasing too few goods.
‘And if you’re old enough, you know the textbooks from the 50s and 60s would have told you that’s what gives you inflation.’
Miles, a key figure at the Office for Budget Responsibility, said the Bank should have ended its money printing programme or raised interest rates sooner.
He told MPs on the Treasury select committee: ‘That aspect of not having tightened policy, or in fact loosening policy on such a scale in 2021, I think could legitimately be described as a policy error. That’s a policy mistake.’
After the Autumn Statement it emerged that Britain will have the highest debt burden of any major economy after the real cost of a decades-long borrowing binge was laid bare in Chancellor Jeremy Hunt’s Budget.
Hunt sanctioned a punishing package of tax rises and spending cuts to bring underlying debt as a proportion of national income down after three years in a move designed to reassure jittery financial markets.
But the total cost of servicing the Government’s £2.4trillion debt pile is set to hit an eye-watering £584billion over the next six years – or almost four times the annual budget of the National Health Service.