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BoE: Caught with its pants down

Following the release of its November inflation report, the Bank of England was inevitably accused of being behind the curve. Naturally, its governor, ‘swervin’’ Mervyn King denied this, but it’s hard not to think that the Old Lady has been caught with her pants down.

It seems like only yesterday that the Bank wrote to the UK’s Chancellor explaining that there were still significant inflationary risks to be addressed. Now, swervin’ Mervyn is warning of the dangers of deflation. He claims that what has materialised since August is unprecedented. “Since August, the world has changed, we have changed our forecasts,” he proclaimed when he unveiled the report on Tuesday. It would be churlish to say that to those of us in the real world, this is pretty obvious. Or should we applaud swervin’ Mervyn for his flexibility, which may or may not yet restore his and the Bank’s credibility?

Clearly, these are troubled times and I have to wonder if it’s time to give former deputy governor Rupert Pennant-Rea his old job back – or perhaps even the top slot. Older readers may remember that he resigned from the Bank in 1995 after reports of an extramarital affair. Sounds like he might have the right qualifications.