Bank of England to do ‘whatever it takes’ to lift inflation to 2% target

Alexander Newton

Mark Carney has said the Bank of England will do ‘whatever it takes’ to return inflation to its 2% target.

The Bank of England governor made the vow at speech at the World Economic Forum in Davos, after UK inflation tumbled to 0.5% last month on the back of the slide in the oil price.

‘We have a very low inflation environment right now largely caused by commodity prices and an ability to look through that,’ Carney said.

‘We have the means, the responsibility and the will to return inflation back to target in the two-year horizon’.

The improvement in the job market, with unemployment falling below 6%, is major factor behind Carney’s optimism

‘It is not lost on us that wages are picking up now in the most recent data and consistent with our expectations,’ Carney said.

Carney also welcomed the European Central Bank’s €1.1 trillion quantitative easing (QE) plan, unveiled last week, describing it as ‘absolutely necessary’.

However, he also said he feared European QE could spark excessive risk taking.

‘In an environment of low interest rates and low inflation for a period of time, and also quantitative easing, there can be excessive risk taking,” Carney said.

‘What those monetary policies are looking to do is move from an environment of reticence to take risk to responsible risk-taking.’

Carney also said while policy makers had restored stability to financial markets, QE may have left investors complacent and living under an ‘illusion of liquidity.’
 
Carney, who is ‘cautiously optimistic’ on the global growth outlook for this year, fears that when the Federal Reserve does eventually raise interest rates and monetary policies across the world diverge investors could come unstuck.