For almost the entire time the Bank of England has enjoyed operational control of monetary policy, the redistributive effects of monetary policy have rarely hit the headlines.
The public appeared to accept that interest rate rises hit borrowers and benefited savers and vice versa. The vast majority of the commentary related to the analysis of whether any monetary policy change was warranted by the prospects for inflation. This, in Britain at least, was the way the Bank of England liked it.
Unelected officials feel very uncomfortable about being seen to favour one group of society over another. Redistribution, after all, is properly something for elected politicians, since it involves using the power of the state to take money from some to give it to others.
It is noteworthy, therefore, both that the distributional effects of quantitative easing are now being raised vocally by strong lobby groups and that the Bank is feeling peeved, rightly so.
Martin Weale, one of the external members of the Monetary Policy Committee, delivered an excellent speech last night on the determinants of UK consumption.
The value of his speech did not arise from his bolted-on views that he does not think “there is likely to be a further case [for more QE] once our current programme is complete”.
Rather it came from taking a really big issue — the likely path of consumption — and analysing it in a way that brought insights from different sorts of households to the aggregate.
But in such an interesting talk, what on earth was he doing referring repeatedly to economic forecasts from the Office for Budget Responsibility? He has no influence over the OBR forecasts, but is important (one of nine) in agreeing the Bank forecasts.
It was akin to Moody’s downgrading UK sovereign debt on the basis of reading a report from S&P.