“Current inflation increases are due entirely to international factors and there is virtually nothing the Bank of England can do to prevent the impact of those increases in UK inflation rates,” he said.
“Eleven years ago the then Chancellor, Gordon Brown, targeted the Bank of England with an inflation figure of 2%. Eleven years on that now looks unrealistic and is hampering the Bank of England in its ability to deal with some of the root causes of the problems within the UK economy. Raising interest rates this week or next month will only add to the inflationary pressures by bringing down the demand for houses and domestic manufacturing goods. It will take more out of the already beleaguered household finances for millions of ordinary people in the UK and will accelerate the slide into recession.
“I would urge the Government to relax the inflation target in recognition of the fact that having imported deflation over the past ten years, the picture has changed radically to a scenario where we are actually importing quite significant levels of inflation through higher prices for fuel and food. By relaxing the inflation target to perhaps 3% or 3.3% the Bank of England will be able to cut interest rates and help stave off a recession and give a much needed signal that both the Bank of England and the Government are serious about easing the burden on the ordinary working family.”
