Minister queries Bank of England’s status as inflation target missed

BUSINESS Secretary Kwasi Kwarteng has heaped pressure on the Bank of England after one of his Cabinet colleagues reportedly questioned its right to remain independent.

Mr Kwarteng said the Bank’s failure to tackle high inflation is clearly ‘an issue’.

He also said inflation must be brought down from 7 per cent to the target of 2 per cent, as senior ministers launched an unusual attack on the Bank’s approach.

One newspaper claimed that government figures were ‘now questioning’ the Bank’s independence over the failure to meet its inflation target.

And a senior minister told The Sunday Telegraph: ‘It has one job to do – to keep inflation at around 2 per cent – and it’s hard to remember the last time it achieved its target.’ Mr Kwarteng yesterday added to the criticism, telling Sky News the Bank’s governor Andrew Bailey has to keep inflation to 2 per cent.

He said: ‘Inflation is running into almost double digits now. That is an issue, clearly.

‘I think Andrew Bailey is doing a good job in difficult times. These are completely unprecedented times.

‘We have had the Covid pandemic, we have had a huge spike in economic activity after the lockdown restrictions were eased, and then, of course, you have got this war in Europe for the first time in 70 years.

‘All of these things mean that it is a very difficult time, and I think he is doing a reasonable job. But it is true to say that 2 per cent is part of their mandate and they have to keep it to 2 per cent.’

The central bank, which has been operationally independent for 25 years, is mandated by Parliament to keep inflation at 2 per cent.

It has raised interest rates from 0.1 per cent to a 13-year high of 1 per cent in a bid to put a lid on prices. But the Bank is facing mounting questions over its stewardship of the economy after warning that inflation will top 10 per cent this year.

Mr Kwarteng acknowledged that it would be ‘very difficult’ to get inflation back down to 2 per cent.

‘Most countries in the world are running high single-digit, some even double-digit, inflation, but they [the Bank] have done a very good job,’ he said.

Mr Kwarteng’s comments come as economists predict that inflation will jump to 9 per cent this week as the cost of living continues to squeeze families.

Official inflation figures will be released on Wednesday, with forecasts pointing to a significant rise on March’s 7 per cent rate.