Andrew Smith, Chief Economist at
KPMG, told Central Lobby that the change may be prompted by the arrival of a new Governor of the Bank.
Mark Carney, Governor of the Bank of Canada, is due to take up the Bank of England role in July.
“At each Budget the Chancellor has to renew the Bank of England Monetary Policy Committee’s remit,” Mr Smith said.
“With a new Governor coming in July, there is speculation that he will want to be a bit different, and within the current remit the Bank has actually done quite a lot.
“It has held inflation well below target and not done anything to bring it down, which I think it would be a mistake, but nevertheless it has exercised a fair bit of flexibility already.
“I think it unlikely we will see a large change in the Bank of England remit, so for example it is unlikely that rather than target 2% inflation it would target 5% inflation.
“I would be surprised if there is no change to the wording of the remit. The Chancellor may make it explicit that the MPC can be more flexible.
“He might also turn to alternative measures which will create a looser monetary policy to try and get growth going that way.”
Mr Smith said that the economy continues to show unimpressive growth.
“The numbers at the start of the year have not been terribly encouraging on economy,” he said.
“I don’t think we should concentrate too much on whether it is a double dip or a triple dip, because overall the picture is that the economy has been pretty flat for the past two years.
“It has been bumping along what we hope is the bottom without any real sign it is going to go one way or the other.
“Output is still well below the peak before the downturn, so this is proving to be the longest recession and the weakest recovery since before the Great Depression, recovery was rather quicker in the 1930s than it is now.”
Mr Smith said the Chancellor’s strategy of combining austerity and recovery “seems to have had at best mixed results, we are not getting much of either”.
“Assuming that the Chancellor sticks to his strategy, his hands are pretty much tied, there is not much he can do because the fiscal side.
“It is only a few months ago, in December, that we had the Autumn Statement so I suspect the OBR will pretty much stick to its growth forecasts for this year and next, which means they won’t change the fiscal numbers much, so I would not expect much change on the forecasts.
“It is a weak growth forecast – 1% this year, 2% next year. We might see a change in a revitalisation of fiscal conservatism and monetary activism review.
“One of the reasons why we think we are here is monetary policy has got interest rates down to zero so we are looking to unconventional policies on the monetary side which by definition are pretty much untried and untested.”
Mr Smith predicted that the Chancellor is unlikely to announce significant tax cuts.
“I always look at the Budget and think ‘has there been a net giveaway or a net increase in the deficit’ and it seems to me that if he sticks to plan he can’t do that,” he said.
“And if you can’t change that materially, you are not going to get much of a boost to the economy. If he does delay or postpone the rise in fuel duty I imagine he will have to try to find a bit of money somewhere else to pay for that.
“To give him his due, where in the last years we have not had the growth or improvement in the deficit, and therefore have had more debt piling up, he has said that we will put off corrective measures into the next parliament.
“It is just possible he could just get away with saying we are going to have a bit of an overlap but not do anything about it now.
“You could argue that those kinds of things are caused by the weakness of the economy.
“Maybe he deliberately does something that will push him away from where he wants to go but they seem pretty strong that that is not what they want to do.”
The Chancellor will present his Budget to the Commons on Wednesday.