The latest inflation data in Britain, which showed that it unexpectedly slows, do not change the vision of Bank of England (BoE) that consumer prices will continue to rise with currency depreciation, which raises the cost of imports.
“I would not be guided by data for October”, said the Governor of Bank of England, Mark Carney. “Unfortunately, the inflation is accelerating, which is a consequence of a very large movement in the exchange rate. The depreciation of the pound after the referendum Brexit was necessary and also reflects market expectations that the British economy will be less open”, added he.
BoE will tolerate acceleration of inflation above target levels to support growth and the labor market while the economy adjusts to changes.
“It is better to have slightly accelerated inflation and more busy people whose nominal wages grow little more than to do the opposite and to face much higher unemployment. Of course, this has its limits”, said also the BoE governor.
Bank of England may revise its economic forecasts next year when there is a better idea of how companies are adapting to the reality that forthcoming UK to leave the European Union. The companies make plans, but it is too early to implement them.
Mark Carney disagreed with claims by some politicians that onerous monetary policy in the UK and beyond, increased inequality. According to him, it is very important to distinguish between monetary policy and the reasons why interest rates globally are low. Inequality is caused by more fundamental factors.
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