U.K. Chancellor of the Exchequer George Osborne said lawmakers would have to be persuaded of the merits of changing the Bank of England’s inflation target and he currently has no plans to do so.
“We have an inflation-targeting regime that has served this country well and provided stability,” Osborne told the House of Commons Treasury Committee in London today. “If you were going to move away from it, Parliament would want to be satisfied that we’d have very significant rewards from it.”
Whether such goals should be revised is a subject of global debate as advanced economies recover slowly from the 2008 financial crisis. There are already signs that central bankers are looking beyond the price mandates to focus on other challenges such as weak expansion.
“There is a debate taking place and it is one of the areas where academia should be taking the lead and the government should follow,” Osborne said. “I have no plans to change the framework.”
Osborne’s comments come days after Bank of Canada Governor Mark Carney, who will succeed King in July, said that he has advocated a “flexible-inflation targeting framework” for Canada and suggested that such goals could be overhauled in times of major slumps. He said later Canada’s lessons may not apply to the U.K.
“I welcome the fact that in Mr. Carney we have someone who is leading international debate and opinion,” Osborne said.
U.K. Business Secretary Vince Cable was cited as saying in the Observer newspaper on Dec. 9 that he would like the Bank of England to have a more explicit target to bolster growth.
The U.S. Federal Reserve entered further into uncharted territory yesterday when it tied the bank’s interest rate outlook to unemployment and inflation, while committing to an even faster expansion of the central bank’s balance sheet.