Bank of England’ credibility at risk, says former chancellor Lamont 

The Bank of England has come under renewed fire over its stewardship of the British economy.

With inflation still painfully high and the cost of borrowing soaring, former Chancellor Norman Lamont said the central bank’s credibility was ‘on the line’.

And City grandee Bruce Carnegie-Brown, chairman of Lloyd’s of London, said it had ‘badly underestimated’ the inflation threat.

The comments came as Bank chief economist Huw Pill admitted ‘weakness’ in its forecast record.

The Bank has raised interest rates from 0.1 per cent to a 15-year high of 5 per cent since December 2021 in a desperate bid to control inflation – pushing up the cost of mortgages. 

But inflation is still more than four times the 2 per cent target at 8.7 per cent.

In a debate at Westminster on low growth, Lamont said: ‘I support the independence of the Bank of England but the credibility of the Bank today is on the line.’

He said that in summer 2021 the Bank refused to halt the quantitative easing programme even as prices accelerated. 

‘In November that year, with inflation three times its target, the Bank was content to leave base rate at 0.1 per cent. 

If the Bank is to regain the confidence of investors it needs to focus hard on this one core objective.

‘Regaining control [of inflation] is urgent. It is the best way to support home-owners and is essential for getting back growth.’

Carnegie-Brown told The CityUK conference: ‘The staying power of inflation has been badly under-estimated by the central bank.’