Tuesday April 22, 2008 - 14:23:18 GMT
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CEP News - www.economicnews.ca
BOE's Besley Says MPC Should Not Attempt to Offset Downside Shocks
09:29 04/22 (CEP News) London â€“ The Bank of England should not
attempt to offset downside shocks to the UK economy and must
concentrate on maintaining price stability, Tim Besley, a member of the
central bank's Monetary Policy Committee (MPC), said on Tuesday.
at a Canada-UK Chamber of Commerce lunch in London, Besley said, "In
line with our remit, monetary policy in the UK ought to remain focused
on achieving price stability as defined by the (2%) inflation target.
Hence, we should avoid trying to offset downside shocks to the real
economy except insofar as they lead to downside risks to inflation in
the medium term."
Monetary policy may be able to smooth rebalancing in the economy, but
it "cannot and should not" try to prevent real, warranted changes in
the economy, he added.
Besley also said that a new facility launched by the BOE on Monday,
which will allow UK banks to swap mortgage-backed assets for Treasury
bills, will help the MPC focus on its key objective of keeping
inflation under control.
He said the Â£50 billion sum mentioned in certain quarters was only an
initial estimate of the usage of the program and could be increased
depending on circumstances.
"Among the reasons that I welcome the initiative announced by the Bank
of England on Monday is that it is targeted directly at alleviating a
key stress that has followed from the current disruption in financial
markets. This should allow the MPC to stay more focused on its task of
using monetary policy to target inflation," Besley added.
Elsewhere in his speech, he said measures of inflation expectations,
especially from surveys and pricing intentions in surveys of
businesses, have remained elevated.
"The BOE is currently at the beginning of its series of meetings
leading up to the publication of the May Inflation Report and its
quarterly economic forecasts," he added.
"It will be possible to process all the economic news since February,
and to assess how it affects the balance of risks, both upside and
downside, to achieving the inflation target in the medium term," Besley
By Gaurav Sharma, email@example.com, edited by Cristina Markham, firstname.lastname@example.org
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