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BoE's Haldane says watching risks of low inflation 'like a dove'

Published 16/11/2014, 18:17
© Reuters Pedestrians walk past the Bank of England in the City of London

LONDON (Reuters) - Bank of England Chief Economist Andy Haldane is watching "like a dove" for signs that expectations of very low inflation in Britain could become entrenched, he said in a speech published on Sunday.

Haldane likened controlling inflation to taming a tiger, and said that while it looked as though central banks had succeeded, declining inflation expectations in many countries showed the tiger was capable of "biting back".

In a speech due to be delivered on Monday at the Royal College of Medicine, Haldane noted that inflation expectations have been falling in Japan, as well as the euro zone and, to a lesser extent, the United States.

And although inflation expectations in Britain have held up well by comparison, Haldane said he had seen signs the "tiger has stirred" in Britain.

"Even in the UK, some measures of household inflation expectations have fallen slightly over the course of this year," he said.

"Wearing my Monetary Policy Committee hat, and with UK inflation already below target, this is something I am watching like a dove."

Central bankers rarely associate themselves with labels like "hawks", who tend to emphasise the economic damage caused by too high inflation, or "doves", who prefer to boost growth by keeping interest rates low.

Inflation in Britain hit a five-year low in September, falling to 1.2 percent from 1.5 percent in August -- well below the Bank of England's 2 percent target.

© Reuters. Pedestrians walk past the Bank of England in the City of London

Britons' expectations for inflation over the next 12 months held steady in October at 1.9 percent, matching the lowest reading since 2009, a monthly poll by YouGov showed last month.

(Reporting by Andy Bruce; Editing by Mark Trevelyan)

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