Budget 2013: Bank of England’s role to widen

GEORGE Osborne yesterday threw his remaining cards behind the new Bank of England Governor as his last hope to revive the economy before the next general election.

The Chancellor said the remit of the central bank would be changed to allow it to focus more on growth, rather than solely on inflation.

The new Governor, Mark Carney, who takes over later this year, will be given far more scope to consider radical measures to revive the UK economy through the money supply.

One of those reforms, Mr Osborne indicated, could see the Bank guaranteeing low interest rates for a certain period of time, as the Federal Reserve in the United States is doing, to boost confidence.

It may also include a further round of money printing – or “quantitative easing” – to get cash out from banks and into firms and households in the hope they start investing and spending.

But the signal given by the Chancellor had already led last night to fears that the Bank could allow inflation to rise further, eroding savings and slashing real-terms household incomes.

The 2 per cent inflation target would remain in place, Mr Osborne said, but the Bank’s new remit would be refocused to concentrate on producing growth.

He added: “The new remit…recognises that the monetary policy committee may need to use unconventional monetary instruments to support the economy while keeping inflation stable.”