Sir Mervyn King has launched a thinly veiled attack on the Chancellor for adopting policies that have made the Bank of England's job difficult by pushing up inflation.
In his opening remarks at the Bank's quarterly Inflation Report press conference, Sir Mervyn blamed "increases in university tuition fees and domestic energy bills, largely resulting from administrative decisions rather than market forces", for adding to inflation and making it difficult for the central bank to hit its official target without harming the recovery. Annual CPI inflation was 2.7 per cent in January, well above the official 2 per cent target. The Bank now expects inflation to remain above the target until 2014.
Sir Mervyn noted that regulated energy prices contributed around 1 percentage point to inflation at the end of last year, more than double the historic average. He referred to some of these government moves, which include raising VAT and putting up tuition fees, as "own goals".
Lord Oakeshott, the Liberal Democrats' former Treasury spokesman, said: "The Governor is basically blaming the Chancellor for pushing up prices." He added: "This unprecedentedly direct criticism of government by a governor must also reflect his frustration at his successor Mark Carney so publicly measuring up the curtains when he doesn't move in until 1 July."
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