Carney tells politicians to keep their noses out
THE Bank of England will not take instructions on its policies from politicians, Bank governor Mark Carney said, two weeks after Prime Minister Theresa May took a swipe at the impact of the Bank’s actions on “ordinary” people.
Speaking this week at Birmingham Town Hall as part of the Bank’s Future Forum event, Mr Carney said it became difficult for the Bank when politicians commented on its policies rather than its objectives.
Mr Carney said politicians had done a “good job” of setting up the system in which the Bank operates, but added: “We are not going to take instruction on our policies from the political side.”
Mrs May hit out the Bank during the Tory conference in Birmingham.
She said it was the rich who benefited from the Bank printing money and cutting interest rates in the years after the 2008 financial crash, while “ordinary working-class people” were asked to make sacrifices in terms of stagnating pay, job insecurity and unaffordable housing.
The Bank took the decision in August to cut interest rates from 0.5 per cent to 0.25 per cent and fire up the printing presses for more quantitative easing in a bid to ward off recession following the Brexit vote.
Mr Carney’s comments came after he revealed that he was willing to allow inflation to run “a bit” higher than its two per cent target if it safeguarded jobs and boosted economic growth. He said up to 500,000 jobs could have been at risk if the Bank had decided not to take action in the wake of the Brexit vote.
Speaking about the collapse in the pound, Mr Carney said the Bank “was not indifferent” to the value of sterling when targeting inflation.
He said changes in the exchange rate “helps cushion the adjustment in the economy”, preventing a harder impact on people’s jobs and wages.
“The exchange rate does matter for inflation, changes in the exchange rate do have an impact on inflation over a period of time,” he added.
“We do take it into account when setting monetary policy. We’re not indifferent to the level, we’re not going to target the level, we’re not going to have some magic number for it, but it does factor into our thinking.”
He added: “The economy has just started a major period of adjustment and what we all want is to make this as successful as possible.”