Bank of England attempting inflation 'confidence trick', says former MPC member Kate Barker

http://www.telegraph.co.uk/finance/economics/8304054/Bank-of-England-attempting-inflation-confidence-trick-says-former-MPC-member-Kate-Barker.html

Ms Barker, who served nine years on the Bank's Monetary Policy Committee (MPC), said rising prices may have already damaged the Bank's credibility and threaten a "more profound" loss of faith among the public.

A loss of credibility is dangerous as people begin to assume inflation will remain over target and so put up wages and prices accordingly, resulting in a self-perpetuating spiral of rising prices.

"If you believe inflation is going to come back to 2pc, you are going to behave as if that's going to happen when you're setting wages and setting prices," said Ms Barker.

"Once you start to think this monetary policy isn't all that it's cracked up to be, and things need to be changed in some way, then things inevitably become more difficult."

She added: "It's like a confidence trick."