COVENTRY, England (Reuters) - A senior policymaker at the Bank of England said on Saturday he did not support the idea of changing the central bank’s remit to focus on a mix on inflation and growth.
Martin Weale, one of nine members of the bank’s Monetary Policy Committee, said adopting a target for nominal gross domestic product in the current environment of low economic growth would risk increasing inflation and inflationary expectations.
Speculation about a possible change in the Bank of England’s focus away from targeting inflation to nominal GDP grew late last year when the next governor of the bank, Canadian Mark Carney, mentioned the idea in a speech.
Since then, Carney has suggested he does not favour such a change at the bank which he is due to join in July.
Weale, who studied nominal GDP targeting in the 1980s, said the Bank would risk sending a signal that it was no longer taking inflation as seriously as before, especially at a time when price growth is running persistently above the bank’s 2 percent target.
“To change a target because inflation was above target would certainly be seen, if not as giving up on inflation, it would be seen as stopping taking it seriously, and I can see that being a problem as well,” he said.
Weale, speaking to students at an economics conference organised by the University of Warwick, said he expected the arrival of Carney would bring changes to the Bank although he declined to speculate in detail on what those changes might be.
“Obviously any organization, when you have a change ... in the boss, then things change,” he said in answer to a question.
“The Bank of England has been around since 1694 and since 1694 it has pursued quite a lot of different policies using different instruments that reflect the circumstances and I certainly wouldn’t want to suggest that that process of innovation must have come to an end.”
Editing by Jason Webb