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Wednesday, January 26, 2022

Bank of England governor Mark Carney warns against political interference

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The Bank of England will not take instructions on its policies from politicians, Bank governor Mark Carney said, just a week after Prime Minister Theresa May took a swipe at the impact of the Bank’s actions on “ordinary” people.

Speaking at the 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 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.

Mr Carney’s comments came as he said earlier on Friday that he was willing to allow inflation to run “a bit” higher than its 2% target if it safeguarded jobs and boosted economic growth.

He said between 400,000 and 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 since the EU referendum result, 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 said: “The economy has just started a major period of adjustment and what we all want is to make this as successful as possible.”

The pound regained some of its mid-day losses against the US dollar following Mr Carney’s comments about the UK currency.

But in afternoon trading, the pound fell 0.5% to 1.218 US dollars and was up 0.08% against the euro at 1.108 euro

Sterling has lost around 18% of its value against the US dollar since the Brexit vote and endured a torrid time on the currency markets last week after investors became increasingly alarmed that Mrs May was seeking to break free of the European single market by opting for a ”hard Brexit”.

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