BOE Currency ‘Mismanagement’ Stoked Inflation, Schneider Says

The Bank of England’s Monetary Policy Committee is faced with volatile inflation because of its reluctance to allow the pound to appreciate, according to Schneider Foreign Exchange.

“The MPC’s mismanagement of the exchange rate is the primary reason why it has had limited, if any success at all, in guiding inflation expectations to where they are supposed to be, Stephen Gallo, head of market analysis in London, said today in an e-mailed note. “It is unlikely that a moderately higher value of the pound and/or bank rate would have done much damage to the pace of growth in U.K. output.”

Policy makers sought to boost the British economy by lowering the value of the pound, David Blanchflower, a member of the committee from 2006 to 2009, said at the Bloomberg European Debt Briefing conference hosted by Bloomberg Link in New York yesterday.

Bank of England Governor Mervyn King said in a speech yesterday that the current bout of inflation is temporary and price growth will slow next year, defending the bank’s decision to keep up stimulus during a “choppy” recovery

“Imported inflation is just as important to households and businesses as domestically driven inflation,” Gallo wrote in the report.

The Bank of England doesn’t respond to market commentary, a spokesman for the central bank in London said by phone today.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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