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Printing ‘too much money’ fueled high inflation, says former Bank of England governor Mervyn King
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The Bank of England came under fire again yesterday for failing to address inflation.
Former governor Lord King said the central bank printed “too much money” through quantitative easing during the pandemic, driving prices higher.
And David Miles, a former member of the Bank’s monetary policy committee who now works for the government’s budget watchdog, said it was a “mistake” not to get the hang of inflation sooner.
Former governor Lord King said the central bank printed ‘too much money’ through quantitative easing during the pandemic, pushing prices higher
Despite inflation rising above the 2 percent target in May 2021, the bank did not begin rate hikes until December. Inflation is now at its highest level in 41 years of 11.1 percent, despite rising from 0.1 percent to 3 percent.
Referring to the impact of the pandemic on economic output, King said, “Covid has left us with too few goods.
And central banks gave us too much money. And so we have too much money chasing too few goods.
“And if you’re old enough, you know the textbooks of the 50s and 60s would have told you that’s what gets you inflation.” Miles, a key figure in the Office for Budget Responsibility, said the bank should have ended its money printing program sooner or raised interest rates sooner.
Speaking to MPs on the Treasury Select Committee, he said: “That aspect of not having tightened policy, or in fact relaxing policy on such a scale in 2021, I think can rightly be described as a policy error. That’s a policy error.’