Bank of England executive director of markets and Monetary Policy Committee member Paul Fisher says there is little monetary policy could have done to offset the inflation shocks of the past couple of years.
In a speech to contacts of the Bank’s agency for Scotland today, Fisher said responding to short-term inflationary movements with monetary policy levers would cause disruption to the economy.
He said: “Given that changes in Bank rate, or asset purchases, take a long time to have their full effect on the economy, monetary policy needs to be forward looking.
“Trying to respond to every short-term movement in prices would probably be futile and would certainly involve a lot of unnecessary volatility.”
Base rate has been held at 0.5 per cent since March 2009. Minutes from the May meeting of the MPC show Fisher was one of the six committee members to vote in favour of keeping base rate at its record-low level.
Fisher added: “Putting up Bank rate could be exactly the wrong thing to do at this precise moment.
“For now, I believe there remains time to allow the economy to recover before the eventual tightening begins.”