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LIVERPOOL (MNI) – The Bank of England Monetary Policy Committee
will give weight to the likelihood inflation will come in higher than
the Bank predicted in its February Inflation Report, Paul Tucker, Deputy
Governor at the Bank of England, said.

His comments, in a question and answer session here, come after the
news earlier Wednesday that arch dove Adam Posen pulled his call for
more quantitative easing at the MPC’s April meeting. Tucker defended the
MPC’s policy of providing heavy stimulus to the economy, but said it
would take into account the deterioration in the inflation outlook.

Asked about the MPC’s policy of quantitative easing, Tucker said
“The reason that we have stimulated the economy ultimately is that, had
we not, we would have been looking to a period where, far from inflation
being very high now, down the road it would have been incredibly low and
possibly negative.”

“Whether we do any more (QE) or not will depend on the outlook for
inflation as we judge it. And … the path back to the 2% target looks
to be slightly higher than perhaps we had thought even three months ago
and that is something that I am sure that we will weigh,” Tucker added.

In the wake of the publication of a Treasury Select Committee
report highlighting the apparently negative impact of quantitative
easing on returns for savers, Tucker said the best thing the MPC can do
is to bring about economic recovery, and savers have a stake in that
recovery.

He said the MPC was sympathetic to savers and the impact of
ultra-loose monetary policy on their investments, but he made clear this
can not determine policy setting.

“It is certainly the case that all of us on the Monetary Policy
Committee, the nine of us, are immensely sympathetic to how savers have
been affected,” Tucker said in a question and answer session at the
Association of Corporate Treasurers annual conference.

“They didn’t cause this crisis and, yet the return on their
investments has in some respects been reduced by the actions we have had
to take,” he added.

However “had we not reduced interest rates as far as we have, and
had we not injected further money into the economy by buying government
bonds, which have bought down long term yields, the recession would have
been a lot deeper than we experienced,” Tucker said,

“Back in 2009 people were seriously worrying about deflation and
about depression. And the reason I say that is that those are
circumstances in which the investments of savers are absolutely
destroyed,” he said.

Savers, like everyone else, will benefit from the recovery.

“Savers are effectively investors in the future prosperity of our
economy. The most important thing that the macro-economic authorities
can do for savers is to bring about recovery in the economy,” Tucker
said.

“And that we will continue to do – so long as it is consistent with
achieving our 2% inflation target,” he added.

“We will, of course, look precisely at what the select committee
have had to say – they are the voice of parliament to which we are
accountable,” he concluded.

–London newsroom 0044 20 7862 7491; email: drobinson@marketnews.com

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