Mark Carney may benefit from easing of inflation

Marc Carney will be boosted by latest fall in inflation rate. Picture: ReutersMarc Carney will be boosted by latest fall in inflation rate. Picture: Reuters
Marc Carney will be boosted by latest fall in inflation rate. Picture: Reuters
ECONOMISTS believe incoming Bank of England governor Mark Carney will have room to print further money or copy Japan’s more radical “Abenomics” after inflation fell to a seven-month low last month.

The consumer prices index (CPI) measure of inflation fell to 2.4 per cent during April, according to official figures published yesterday by the Office for National Statistics (ONS).

Falling diesel and petrol prices, along with a drop in the cost of airline tickets following Easter, helped to lower CPI, which stood at 2.8 per cent in March.

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Analysts believe the easing of inflation will give Carney ammunition to sweet-talk the Bank’s monetary policy committee (MPC) into launching further quantitative easing (QE) to help the economy continue to grow.

Yusuf Heusen, a sales trader at IG, said: “Incoming governor Mark Carney will have more room for manoeuvre if he looks to give the economy a shot in the arm via additional QE or even perhaps more unconventional measures. Abenomics has apparently proved its worth in Japan, perhaps a dose of it in the UK might help jolt Britain out of its current malaise.”

Howard Archer, chief UK and European economist at forecasting group IHS Global Insight, added: “The Bank of England will go for more QE once Mark Carney takes over as governor in July. Carney will be keen to try and build up escape velocity from the economy’s extended softness and will be keen to establish his presence.

“Carney will only have one vote out of nine in the MPC, as does Sir Mervyn King, but we suspect he will be able to carry a majority of MPC members with him should he favour more help for the economy, which we believe he will unless there is sustained clear overall improvement in the data through to July.

“It also seems highly probable that the Bank of England under Carney will adopt the policy of giving guidance on the likely future path of interest rates.”

Victoria Clarke, an economist at Investec Securities, agreed. She said: “Carney will wish to push for ‘escape velocity’ and the committee will back him.”