Thursday, June 03, 2010

Bank of England warns of inflation dangers

Charles Bean raised the spectre of hyperinflation, saying it is "severely misguided" to hope that a rise in prices would help Britain out of its current predicament.

His comments come amid growing suspicion that politicians around the world may eventually resort to inflation as a means of reducing what they owe in capital markets, and follow the Swedish Riksbank's decision to change its inflation target.

In an opinion piece for on Friday, Mr Bean writes: "Some people have suggested that a bit of extra inflation now might actually be a good thing. After all, wouldn't it help to get the economy going by reducing the real value of public and private debt? This is severely misguided.

"Aside from the dubious morality of redistributing wealth from savers to borrowers, we have seen from past experience that a bit of inflation has a nasty habit of turning into a lot of inflation."

He said the MPC should stick to its 2pc inflation target.

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