Speaking at the World Economic Forum in Davos, Switzerland, Mr Carney indicated he was prepared to see inflation, which is currently running at 2.7 per cent, remain higher than the government's two per cent goal for longer if it means output can be increased faster.
He said: 'If you are coming from above [the inflation target] and you have a fiscal consolidation you might take a little longer to get back given the issues with output.'
Mr Carney was unveiled in November as the surprise choice to succeed Sir Mervyn King but has rarely spoken about monetary policy ahead of his taking over in July.
While interest rates have remained at a record low of 0.5 per cent for almost four years, the Bank has pumped £375billion into the economy via quantitative easing – printing money.
Economists are looking to the Canadian to lift the economy out of the doldrums, where it languishes 3.3 per cent below its peak before the 2008 recession.
A report from the Office for National Statistics last week fuelled fears that Britain is sliding towards a triple-dip recession.
Mr Carney's comments were met with some surprise in the City last night.
David Buik, of Cantor Index, said: 'I was surprised to see Mr Carney so vociferous, considering his feet are not under Sir Mervyn's table yet.
'[But his] thinking is not wholly different to that of the existing BoE management.'The new Bank of England governor today insisted that ideas on monetary policy were not yet 'maxed out', in a radical speech at Davos.
Mark Carney, who will remain head of Canada's central bank until July, said the world's major economies needed to achieve 'escape velocity' - in which growth becomes self-sustaining.
His speech advocated a dramatically looser system to that supported by Sir Melvyn, who had implied there was little more he could do to boost growth.
Mr Carney said central banks do not have the powers to 'to take all of these risks out to get a sustainable recovery'.
It will come as good news to George Osborne, boosting the Tories' deficit cutting programme.
'You internalise the fiscal stance in the monetary policy mix,' said Mr Carney. 'Monetary policy is more nimble than fiscal policy.'
His call to arms came as International Monetary Fund head Christine Lagarde urged a closing panel: 'Do not relax.'
She said the IMF outlook for a 'fragile and timid' recovery depended on officials in the powerhouse economies of Europe, the U.S. and Japan making 'the right decisions.'
And it seems that Mr Carney will not shy away from difficult subjects, as he confronted those who suggested that monetary policy was impotent.
In a direct rejection of a comment from Angel Gurría, secretary-general of the Organisation for Economic Cooperation and Development, he said: 'I would take issue with Angel in saying that monetary policy is maxed out.
'There continue to be monetary policy options in all major economies and they have to be framed in the context of the [monetary policy] mandate.'
The fiery banking chief emphasised 'flexible inflation targeting' for developed countries, using 'communication' and 'other unconventional instruments' to allow achieve price stability and sustainable growth over time.
He underlined his activist approach by adding: 'The role of central bank is to determine the optimal path to return inflation to target taking into account all the broader impacts on the economy and the impact on financial vulnerability, including the global financial situation.'
The meeting of 2,500 business, financial and political leaders took place in a more upbeat atmosphere than last year.
Fears over the breakup the euro currency union have eased, while the U.S. has avoided the 'fiscal cliff' of automatic tax increases and spending cuts that threatened to push the world's largest economy back into recession.
The IMF estimates that the world economy will grow about 3.5 per cent this year, modestly better than last year's 3.2 per cent.
Yet the improvement is uneven, with the eurozone and Japan in recession, although the U.S. is growing, and emerging economies such as China are expanding much more quickly.
Lagarde said the eurozone was still in 'a very fragile situation' that was made more risky through a slow decision-making process and occasional backtracking on initiatives.
'Good decisions have been made,' she said. 'Sometimes at the last minute, as in the United States, sometimes laborious and confusingly as in the eurozone. In 2013 they have to keep up the momentum'
Original Article
Source: dailymail.co.uk
Author: Emma Reynolds and Daily Mail Reporter
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