The Bank of England must avoid rate overkill, says Kate Barker

Kate Barker believes that Britain should escape a recession such as those suffered in the early 1980s and early 1990s

Gary Duncan, Economics Editor, The Times OnLine - 14 July 2008

The Bank of England must guard against keeping interest rates too high for too long and from tipping Britain’s economy into a slump as it fights to curb inflation, one of its most influential officials says today.

The warning that the Bank must strive to avoid interest-rate overkill, from Kate Barker, the longest-serving external member of its Monetary Policy Committee (MPC), will dampen City speculation that rates will be raised soon to combat rising inflation.

Britain should escape a severe recession, such as those suffered in the early 1980s and early 1990s, Ms Barker told The Times, after a barrage of grim economic news in the past two weeks. However, she emphasised that the stakes were quite high over risks that the Bank could make a grave error as it tried to steer a course between the conflicting pressures of rapidly weakening growth and fierce inflationary pressures - full article