We at The Spectator have not had much company in criticising Mervyn King for the failure
of his monetary policy. The Bank of England governor has a status like the Speaker used to: someone whose position must command respect, otherwise the system collapses. And yet there are Octopuses
with a better track record in inflation forecasting. People have been repeating that the Bank’s independence is a great success for so long that it has become a truism. Why? We’ve just
had a huge crash, the result of a credit bubble – fuelled by dangerously low lending rates. And the recipe for restoration? Even cheaper debt, with resurgent inflation.
The British economic commentators agree with King that inflation is not a problem; 0.5 percent base rates are somehow appropriate for an economy now growing back at a trend rate of 2 percent a year.
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