JP Morgan AM's Karen Ward: Bank of England 'should not be blamed' for rate rises

investmentweek.co.uk:

Karen Ward, chief market strategist, EMEA, JP Morgan Asset Management and adviser to Chancellor of the Exchequer

Ward said the central bank's efforts to tackle inflation leave the country facing a mild recession in the short term, while the alternative would be a deeper downturn in future.

 «Ultimately, the Bank of England has no choice but to bring down demand», Ward wrote in The Times, and «should not be blamed for doing its job».

Bank of England is running out of ideas to tackle inflation

The Bank has been under pressure to bring down inflation, which was unchanged at 8.7% in May well above its 2% target.

Core inflation, which strips out volatile energy and food prices, rose to its highest level in 31 years. 

The Bank's nine-strong Monetary Policy Committee responded to the latest inflation figures by voting to increase rates by 0.5 percentage points to 5%, putting further pressure on households.

Defending the move, Ward said many of today's mortgage-holders had not witnessed the «cost in inaction» of the 1970s.

She also agreed with comments made by Jerome Powell, chair of the US Federal Reserve, last week, who said «there may be social costs associated with restoring price stability, the social costs of failing to restore price stability will be higher».

Andrew Bailey: 'We are not desiring a recession but we will do what is necessary to bring inflation down'

The Bank of England has faced criticism from other advisers to the Chancellor for underestimating the inflation crisis, as well as some Conservative MPs.

Public confidence in the Bank's ability to get inflation back under control has plummeted to a record low, according to an attitudes survey conducted by Ipsos before the latest official inflation data and