(Alliance News) - The Bank of England's credibility is "on the line" in the face of stubbornly high inflation, Tory former chancellor Norman Lamont has said.
In the recent past, the central bank had not "sounded or acted as though it was determined" to tackle rising prices, the Tory grandee told Parliament.
To regain confidence, it would have to "focus hard" on the core goal of bringing down inflation, the peer argued.
Lamont made his comments after inflation failed to ease as hoped in May, remaining at 8.7%.
In response, the bank raised interest rates to a 15-year high of 5% last week in a shock move designed to tame it, ramping up the pressure on mortgage-holders.
It is tasked with keeping inflation as close to 2% as it can.
Lamont was critical of the bank for failing to take action sooner.
Speaking in a debate at Westminster on low growth in the UK economy, he said: "I support the independence of the Bank of England … but the credibility of the Bank of England today is on the line.
"In the recent past it hasn't sounded or acted as though it was determined to defeat inflation.
"In the summer of 2021, the bank refused to halt the quantitative easing programme unleashed during Covid, even when it became inappropriate as prices accelerated and distortions in asset prices were obvious.
"In November that year, with inflation three times its target, the bank was content to leave base rate at 0.1%.
"If the bank is to regain the confidence of investors it needs to focus hard on this one core objective."
He told the upper chamber: "Regaining control (of inflation) is urgent. It is the best way to support homeowners and is essential for getting back growth.
"There are some who want to peddle illusory, easy answers, but as the prime minister said people know that if something is too good to be true, then it isn't true.
"Difficult as it is, I believe the government are on the right track and I urge them not to be diverted."
Warning against calls for a mortgage rescue plan, Lamont said: "It makes no sense for the Bank of England to be bearing down on inflation by raising interest rates if at the same time the government are to subsidise rising interest rates.
"Nor is it equitable to task those not owning houses to subsidise those already on the ladder. Many renters pay a higher % of their income on rent than homeowners."
Earlier in the debate, he said: "I believe that we can't have sustained growth without first getting on top of inflation. Stability, sound finance and low inflation are preconditions of growth.
"Some people talk about economic growth as though they are the first people ever to have thought of the idea – with one bound, Jack will be free.
"Of course, growth must be the ultimate objective of economic policy but it can't just be conjured into existence by politicians snapping their fingers.
"Sadly, I do not believe that we can return the present situation to inflation to 2% without a contraction, not a recession but some contraction in activity to realign demand with weaker supply."
Economist Brian Griffiths, who served as Margaret Thatcher's chief policy adviser, said: "If we don't tackle inflation, then I am afraid we will live with the current stagflation which we are experiencing of high inflation and very low growth.
"I think interest rates must be raised to the level which reduced overall spending so inflation will come down. I simply think 5% is not enough."
source: PA
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