Douglas Carswell's Blog

Rising inflation suggests MPC wrong

Back in March, one Adam Posen of the Bank of England’s monetary policy committee assured us that inflation would be coming down. 

Two months on, how’s his forecast looking? 

Just as a broken watch tells the right time twice a day, I’m sure inflation will eventually come down - and the forecast come right.  But right now, Mr Posen’s prediction is looking a little off.   

Today, the CPI reached 4.5 percent.  This means that those charged with running a monetary policy to keep inflation below 2 percent are a whopping 150 percent off course.  As Guido Fawkes points out, at this rate the value of £1 will decline by half every 13 years. Not really the basis for creating a prosperous and productive economy, is it?

Back in March, Mr Posen’s used his forecast of lower inflation to call for more quantative easing printing more money.  Do you suppose Mr Posen and co will now be demanding that the Bank switch off the printing presses?   

It seems that all but three of the Bank of England’s “wise men” have repeatedly voted to keep interest rates at record lows. In other words, in response to a shortage of credit in the system, the money managers have helped keep the price of credit down. Any ideas why there might then still a shortage of credit, guys?

According to newspaper reports, Mr Posen’s said he’d “not seek re-election to Threadneedle Street's monetary policy committee if his view turned out to be wrong”.  I shall keep reminding readers - and if necessary the Commons select committee that oversees these things.    

The real problem, it seems to me, is not which “experts” we have trying to plan monetary policy.  Rather the fault lies in having a system of state planned monetary policy that relies on experts in the first place.

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