Britain has entered a “hazardous” period and inflation could be above target next year, Bank of England Deputy Governor Charles Bean was quoted as saying yesterday.
“I am not expecting inflation to be way above target, but just moderately above target,” Mr Bean said in a newspaper interview.
He was quoted as saying there was also a risk of a more “anaemic” recovery than the bank had forecast.
“We are in an economy which is recovering from a very deep recession indeed, where there is still a substantial margin of spare capacity, where unemployment is elevated,” he said.
Among the risks facing the economy are the crises in Japan and Libya, Mr Bean said. “When one sets policy one is weighing up multiple risks in different directions. We are in very hazardous times.”
Asked if an increase in interest rates would be a futile gesture, he said: “If a rise in interest rates is not warranted by the medium term outlook for inflation, why on earth would raising interest rates help your credibility?”