Adam Carr of ICAP reiterates an increasingly important thesis, with consequences for challenged inflation targeters everywhere. In talking about Bank of England Governor Mervyn King's statements, he comments:
"[King remarked] “The economic consequences of high-level indebtedness now would become more severe if rates were to rise and that this was “the main reason why interest rates are so low.”
Depending on the context of that statement it’s a fairly blunt admission that the BoE has dropped its inflation target and that rate hikes are some way off. These are very grave days indeed, but his comments are more far reaching than that – they ultimately herald the end of independent central banking."
