Broadbent gives speech on "Government debt and inflation"

Highlights:

"For our part, one important gauge of that credibility is expected inflation in financial markets. Were there a serious concern that inflation would drift away from target, whether because of higher levels of debt or for any other reason, you'd expect to see it reflected in higher "breakeven rates" in gilts markets (i.e. the difference in the yields on conventional and indexed debt). Thus far that has not happened. Come what may, the MPC will respond to economic events as they unfold to ensure, in line with our remit, that the stability of inflation is maintained."

"it would now be significantly harder to "inflate away" the public sector's liabilities than in the past. Thanks to a combination of indexed gilt issuance and (somewhat ironically) QE, the relevant "tax base" – non-indexed, longer-term debt in the hands of the private sector – is much lower than in the 1970s and 80s. But the most important guarantee of price stability is a stable regime governing monetary policy and macroeconomic policy more generally."