BOE’s not going to take instruction on policies from the political side, says Carney
The Bank of England will not take instructions on its policies from politicians, its governor, Mark Carney, has said, just a week after Theresa May took a swipe at the impact of the Bank’s actions on “ordinary” people. Speaking at Birmingham town hall as part of the Bank’s Future Forum event on Friday, Carney said it became difficult for the Bank when politicians commented on its policies rather than its objectives.
He 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.”
May hit out at the Bank during the Tory party conference last week. 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% to 0.25% and fire up the printing presses for more quantitative easing in a bid to ward off recession following the Brexit vote. At Friday’s meeting in Birmingham, Carney hinted that the Bank will let inflation overshoot its target – meaning rising prices for households – by keeping interest rates low. With the weak pound pushing up import costs, Carney said people should expect an impact on living standards as higher costs are passed on. This week the effect on import costs sparked a row over the price of Marmite between its makers Unilever and supermarket Tesco.
Speaking as the pound came under further pressure against other currencies on worries over the UK’s economic outlook, Carney also said the central bank was “not indifferent” to the level of sterling, but did not target the exchange rate.
His comments underscore the balancing act the Bank will face over the coming months as the pound’s fall and low interest rates push up inflation while uncertainty brought by the Brexit vote threatens to knock economic growth and employment. The Bank cut interest rates to a record low of 0.25% in August and has signalled it could cut again to around 0.1% by the end of this year.
Speaking during a day of events across the Midlands to explain the Bank’s role and to canvas views from the public, Carney said that for those on the lowest incomes, “it is going to get more difficult as we move from no inflation to some inflation”.
