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Carney last month sparked debate on the future of the BOE’s mandate when he said nominal gross domestic product targeting could be an even “more powerful tool” to stimulate economies, though he didn’t discuss the subject in Davos.

King, Turner

Bank of England Governor Mervyn King in a speech last week welcomed the debate, saying it’s “sensible” to review monetary policy arrangements. Adair Turner, chairman of the U.K.’s Financial Services Authority, will say in a speech next month that an inflation target isn’t enough to promote growth, the Sunday Telegraph reported Sunday without saying where it got the information.

Drawing a closer parallel with Canada, Carney said in Davos that a central bank could “lean into the wind” if inflation is below target and yet there is a potential issue with household credit. That may involve keeping monetary policy tighter than otherwise would be the case.

Canada’s inflation rate was at a three-year low of 0.8% in December and Carney has identified consumer debt as a concern.

“Within the framework of flexible inflation targeting that exists in most of the developed economies, there remains considerable flexibility,” Carney said.

More Stimulus

King said in a speech on Jan. 22 that the bank is “ready to provide more stimulus if it is needed.” Minutes of the bank’s Jan. 10 policy decision also showed that officials saw scope for asset purchases to lower bond yields and support asset prices, though “there remained uncertainty about their impact on nominal demand” as the economy rebalances and the banking system heals.

U.K. lawmakers will question Carney on the BOE’s quantitative easing program when he appears before the Treasury Select Committee on Feb. 7.

While monetary policy can be more “nimble” than fiscal policy, central banks alone cannot overcome economic strains, Carney said. Governments in Europe and the U.S. need to take steps too.

“There is not an ability of central banks to take all these risks out or set the seeds for a sustainable recovery,” he said.

Bloomberg.com