The Bank of England needs to provide a better justification for believing the rise in inflation is temporary, according to an influential parliamentary committee, which also queried the need for continued quantitative easing.
The House of Lords economic affairs committee, which includes former BoE governor Mervyn King, said on Friday that the BoE had failed to justify its flagship QE policy — the practice by which central banks seek to stimulate spending by creating money and pumping it into the economy by purchasing assets.
Lord Michael Forsyth of Drumlean, chair of the economic affairs committee, said that the bank “has become addicted” to quantitative easing, using it as the “answer to all the country’s economic problems”, and facing few questions despite its “eye-watering” size.
He added that there were “risks, given where the economy is, that inflation could take off” and while the bank says that it will be temporary, it should spell out “the plan if it turns out that is not the case”.
The committee’s report will sting inside…
