In the first of their two reports this year, the six "wise persons" argue that policy needs to be extremely cautious if the Government wants to hit its inflation target.
"Most of us do not think that the next move in interest rates should necessarily be downwards, and some of us feel that there is already or could soon be a good case for raising interest rates if the Government is serious about achieving its inflation objective," the report, released yesterday, concludes. The exception was Professor Patrick Minford of Liverpool University, taking the minority view that the economy has plent of spare capacity.
Similarly, only Professor Minford argued that there was scope for more than token tax cuts of pounds 2-pounds 3bn in this year's Budget. Indeed, half of the panel's members suggested that either tax increases or further government spending cuts are necessary. These recommendations are based on the Government's 2.5 per cent target for inflation excluding mortgage interest payments.
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