The Bank of England’s governance structure has taken a bruising of late. The Treasury Committee has questioned whether its Court of Directors is up to the job, and has called for more external members of the Financial Policy Committee – hardly a ringing endorsement of Bank personnel.
So it was with more excitement than the subject of central bank governance usually commands that the Bank’s governor, flanked by four of his fellow interim FPC members, faced the committee this morning for an evidence session on its accountability.
But for those expecting a grilling it was rather a damp squib. With the exception of George Mudie MP, who told the Bank it was getting “great power” with very little in the way of accountability in return, the questioning of committee members appeared rather subdued. Perhaps because the Bank attempted to downplay any concerns the committee might have by heaping it with praise. Read more
In justifying why the Bank of England’s policy rate remains on hold, Sir Mervyn King frequently notes that inflation of more than double the Bank’s target has yet to lead to higher wages.
Before at the Treasury Committee this morning, Sir Mervyn again indicated the avoidance of a wage-price spiral was playing a key role in the decision to keep bank rate at 0.5%.
The governor now appears to be publicising a new line of argument as well. The argument, first voiced at the May Inflation Report press conference, goes like this. Read more
The Bank for International Settlements’ Annual Report, released Sunday, more than any other document influences the global central banking agenda. Reports have held more sway in recent years owing to the BIS both forecasting the crisis – well more so than others anyway – and highlighting the deficiencies of some of central banking’s then-sacred cows, notably inflation targeting.
The reports rarely shirk the big issues. And this year’s address head-on the rather awkward question of whether the crisis constitutes a negative supply shock. The BIS says yes. And what’s more, as there is far less slack than many policymakers are willing to admit, policy rates in not just emerging, but also advanced economies, must soon rise despite weak growth.
The BIS is probably right. But will the European Central Bank, the Fed and the Bank of England budge? That depends on two factors. Read more