Deflation could still hit the UK, insists defiant Bank of England official Fisher
THE UK could still face a deflationary threat despite stubbornly high inflation, Bank of England rate-setter Paul Fisher claimed yesterday.
“The economy could be much weaker than we expect, pushing down on inflation and risking deflation,” Fisher told a gathering in London yesterday.
“Recovering to the target from that could be even harder,” he said.
Fisher also acknowledged an upside risk to inflation, which currently stands at 4.5 per cent on the consumer price index.
“Higher inflation expectations could become entrenched making it very costly for the Bank to subsequently bring inflation back to target,” he said. “There are very major risks to either side.”
The Bank has been correct to keep rates at their historic low of 0.5 per cent for over two years, Fisher argued.
“I do not think I have heard many argue that we should have done something materially different with policy during the depths of the recession,” Fisher said.