Sir Merv of the BOE going against the idea which is being floated by his successor Mark Carney..
Speaking at a CBI dinner in Belfast, Sir Mervyn said: “To drop the objective of low inflation would be to forget a lesson from our post-war history.”
“In the 1960s, Britain stood out from much of the rest of the industrialised world in trying to target an unrealistic growth rate for the economy as a whole, while pretending that its pursuit was consistent with stable inflation.
“The painful experience of the 1970s showed that this illusion on the part of policy-makers came at a terrible price for working men and women in this country.”
Inflation averaged at 13pc a year in the 1970s, peaking at 25pc in 1975.
Inflation targeting has been in place since Britain crashed out of the Exchange Rate Mechanism in 1992. While Sir Mervyn conceded that there are “certainly aspects of the inflation targeting regime to consider,” he said price stability should remain priority.
Sir Mervyn said that the 2pc target had not been a barrier to recovery during the current crisis, because there was sufficient flexibility built into the remit for the MPC to focus on growth as well as pricing.
Full Telegraph story here..
