LONDON, Oct 19 Reuters A future British government should consider raising the Bank of England39;s inflation target from 2 to 3 to give it more room for manoeuvre during economic downturns and ease the burden on the public finances, a leading think tank said on Thursday.

The Resolution Foundation said a raised inflation target would allow higher nominal interest rates, leaving more room for them to be cut in a downturn.

Combined with a willingness to cut rates as low as minus 1, this would allow the BoE to provide more interestrate stimulus during a crisis, reducing the need for government borrowing and for bondbuying by the central bank, the think tank said.

The Bank of England needs greater monetary firepower, secured by enabling slightly negative interest rates and taking steps to move to a 3 inflation target, James Smith, research director at the foundation and a former BoE economist, said.

Changing the inflation target should only happen once the BoE has returned price growth to its current 2 target, to avoid damaging the central bank39;s credibility, the think tank said.

British inflation hit a 41year high of 11.1 a year ago and at 6.7 remains the highest among major advanced economies.

A review of the BoE39;s inflationtargeting framework is likely after Britain39;s next national election expected in 2024.

The report said any change to the inflation target would ideally be done in coordination with other advanced economies, to limit the negative impact on…