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Osborne Says Bank Credibility Not Under Threat

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http://uk.reuters.com/article/2011/02/20/uk-britain-osborne-boe-idUKTRE71J18O20110220

Britain has no plans to alter the Bank of England's inflation-fighting remit and Governor Mervyn King's support of fiscal tightening has not harmed the central bank's credibility, Chancellor George Osborne said.

Surging oil and commodity prices combined with this year's rise in value added tax propelled British inflation to 4 percent in January -- double the Bank's target -- but the Bank does not seem in any hurry to raise rates from the current 0.5 percent.

Indeed, inflation in Britain has been above target for most of the last five years, leading some economists to question the Bank's inflation-fighting zeal and the validity of the consumer price inflation target.

Last week's inflation data obliged King to write an explanatory letter to the government -- his tenth in almost four years -- but Osborne said he saw no case for altering the 2 percent target.

"I think the inflation regime, the remit, is the correct one. I've got absolutely no thoughts or plans about changing it," Osborne told reporters after a meeting of G20 finance ministers in Paris at the weekend.

"And as my exchange of letters with the Governor confirmed, I'm happy with the approach they're taking and I trust the judgement of the Monetary Policy Committee."

The inflation target is more of a suggestion than a target to be achieved. Even at 2% at some point you will hit the exponential problem.

"Goodhart's law".

This is the theory named after the economist Charles Goodhart, which states that once an economic indicator is made a target of public policy it becomes increasingly devalued and eventually irrelevant or even counter-productive.

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Indeed, inflation in Britain has been above target for most of the last five years, leading some economists to question the Bank's inflation-fighting zeal and the validity of the consumer price inflation target.

Adding in the the error of 0.3% per year in their clothing/shoe inflation figures that they recently admitted then inflation has been above target for most of the last 6 years.

The bank has no credibility that's why they keep saying it's not under threat.

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George ,George quick say something I don`t think they believe me any more

They are just preparing the ground. There wont be any rate rises this year

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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