Central banks around the world are facing the worst crisis of confidence since the 1930s, as investors, households and firms question their commitment and ability to deliver price stability.
Whether it is inflation or deflation, outsiders question whether the major central banks will be able to regulate prices in the next few years.
TOO HOT ….
Bank of England Chief Economist Spencer Dale last week lashed out at what he branded “dangerous talk” the Bank had gone soft on inflation and was choosing to ignore price increases persistently above the target.
Dale admitted “One of the most worrying comments I have heard in recent months came at a lunch of senior businessmen I attended. One of the diners suggested that the UK was returning to its old ways of “depreciating the exchange rate and inflating its way out of trouble.” Soon after, a City circular asked “is the MPC turning a blind eye to inflation.” This is dangerous talk. The evils of inflation are well known.”
He insisted the monetary policy committee (MPC) had only three main priorities — inflation, inflation, inflation — and was committed to meeting the target.