Issue of the week: knives out for the governor
The growing tension between No. 10 and the Bank of England could have dangerous repercussions
When Harold Wilson devalued the pound nearly 50 years ago, he explained the move to the British public as an almost abstract, international event: “It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.” In practice, of course, it meant precisely that, said Jeremy Warner in The Sunday Telegraph. “Within two years, the rate of inflation doubled to more than 6%. Pretty soon we were on to the nearhyperinflation of the 1970s.” History is unlikely to repeat itself, but the fact remains that Britons are about to become “notably poorer” as a consequence of the falling pound and rising inflation. The governor of the Bank of England will soon be in the embarrassing position of having to write repeated letters to the Chancellor explaining the overshoot above the 2% target. “Worse, his further monetary easing in response to the Brexit vote makes him very much complicit in producing this effect.”
The knives are out for Mark Carney, said Alex Brummer in the Daily Mail. PM Theresa May has pointedly grumbled about “the bad side effects” of ultra-low interest rates and quantitative easing. Now she seems to have set “the dogs of war” loose. In an article this week, the former foreign secretary William Hague accused the Bank of contaminating the currency and ruining the lives of savers. That in itself was unremarkable, said Nils Pratley in The Guardian. “Many people think nearzero interest rates and QE” are now “doing more harm than good”. But Hague jumped to an “explosive conclusion”. Unless central banks start to raise their rates, he wrote, “the era of their much-vaunted independence will come, possibly quite dramatically, to its end”. Was he making a threat: raise interest rates, or else? Carney, who will shortly decide whether to serve a full eight-year term until 2021, must be “feeling uneasy”. After the drubbing he took pre-referendum for allegedly aiding George Osborne’s “Project Fear”, he now finds the Bank’s monetary policy under assault.
The governor has “navigated the post-referendum turbulence with some deftness”, said the FT. “The economy’s relative resilience since the vote is in no small part due to the Boe’s actions to stabilise markets and boost confidence”; spats about the country’s monetary regime “are one source of uncertainty the UK could do without”. It’s time the whispering stopped. Indeed, said Simon English in the London Evening Standard. “We all like a bit of anarchy… as the Brexit vote demonstrates.” But if you think the pound is wobbly now, try binning the Bank’s governor for no good reason – “and see what a currency crisis really looks like”.