Printing ‘too much money’ fuelled high inflation, blasts Mervyn King

The Bank of England came under fresh fire yesterday for failing to tackle inflation.

Former governor Lord King said the central bank printed ‘too much money’ during the pandemic through quantitative easing – pushing 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 to grips with inflation earlier. 

Despite inflation rising above the 2 per cent target in May 2021, the Bank did not start hiking interest rates until December. Inflation is now at a 41-year high of 11.1 per cent despite rates rising from 0.1 per cent to 3 per cent.

Referring to the impact of the pandemic on economic output, King said: ‘Covid gave us 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 from the 50s and 60s would have told you that’s what gives you inflation.’ Miles, a key figure at the Office for Budget Responsibility, said the Bank should have ended its money printing programme or raised interest rates sooner.

He told MPs on the Treasury select committee: ‘That aspect of not having tightened policy, or in fact loosening policy on such a scale in 2021, I think could legitimately be described as a policy error. That’s a policy mistake.’