Bank of England

Tom Burgis

Mark Carney, the incoming governor of the Bank of England, was grilled by MPs and his ECB counterpart Mario Draghi faced awkward questions. By Tom Burgis, Ben Fenton and Lina Saigol in London with contributions from FT correspondents. All times are GMT.  

By Gavyn Davies

The macroeconomic debate is now buzzing about “political dominance” over the central banks, under which elected politicians force central bankers to take actions they would not choose to take, if left to their own devices [1]. This is clearly what is happening in Japan, where the incoming Shinzo Abe government is not only imposing a new inflation target on the Bank of Japan (which is legitimate), but is changing the leadership of the central bank to ensure that the BoJ adopts policies compliant with the fiscal regime. This is not just political dominance, it is fiscal dominance, where monetary policy is subordinated to the decisions of those who set budgetary policy.

There have also been some early signs of political or fiscal dominance emerging elsewhere, notably in the use of the ECB balance sheet to finance cross-border financial support operations in the eurozone, and the “coupon raid” conducted by the UK Treasury on the Bank of England. Many investors have concluded that there is now an inevitable trend in place that will overthrow central bank independence throughout the developed world, allowing politicians to expand fiscal policy, while simultaneously inflating away the burden of public debt.

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Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

BoJ easing

The Bank of Japan looks set to ease policy next Tuesday, with most expecting a ¥10trn expansion of its quantitative easing programme, which will take the size of the programme to ¥90trn. Read more

Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

Rate votes Read more

Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

More QE from the Bank?

The Bank of England‘s Monetary Policy Committee meets on Wednesday and Thursday, when the decision is due out at noon UK time (11am GMT).

Will the MPC vote for more QE? Read more

Claire Jones

Our week ahead email helps you to track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

FOMC/ BoJ votes

The big events next week are the Federal Open Market Committee and Bank of Japan policy votes.

The FOMC decision, due out Wednesday afternoon DC time, is not expected to see further quantitative easing announced. However, the FT’s Gavyn Davies says this does not necessarily mean we’ve seen the last of QE from the Fed: Read more

Claire Jones

The Bank of England’s forecasting record, both for inflation and growth, has in recent years been woeful.

But would the Bank have done any better if its officials’ pay depended on the forecasts’ accuracy?

According to a paper out today from the Centre for Economic Policy Research, the answer is yes.

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Claire Jones

Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

FOMC/ BoJ votes

The Federal Open Market Committee and the Bank of Japan’s policy board both vote on Tuesday. Will either panel back a change in course?  Read more

Claire Jones

Sir Mervyn King has in the past been of the sort of central banker that has, at every opportunity, extolled the virtues of inflation targeting.

So comments at yesterday’s Inflation Report press conference, where the governor conceded that the Bank of England’s monetary policy framework has its deficiencies, were something of a surprise. Here’s what he said:

“I do think the experience of the last four to five years has raised some question marks about what inflation targeting can hope to achieve and whether it’s sufficient. I think our feeling now is, on its own, it’s not sufficient, it did not prevent the build up of a large degree of financial instability. And there is I think a debate to be had about whether other instruments are the right way to deal with that, through our Financial Policy Committee, or whether monetary policy should take other considerations into account.”

Could this be the beginning of the end for the Bank of England’s inflation target, at least in its current guise?

It’s far too early to say. Besides, with the governor due to depart mid-way through next year, whether or not the Bank alters its monetary policy framework will largely depend on the views of Sir Mervyn’s successor.

However, his calls for a debate could prove significant. Read more

Grim. Whether it is Sir Mervyn King’s warning the recovery is off-track, inflation rising to equal a 20-year high or the new Ernst & Young Item Club forecast expecting UK growth of only 0.9 per cent this year, the word describes the current economic outlook. Hopes that Britain could show in 2011 that it was escaping the grip of the financial crisis have been dashed.

The Bank of England governor blamed the rest of Europe for Britain’s feeble recovery. “The main impediment to the strategy of rebalancing our economy is markedly slower growth in our major export markets, especially in the rest of Europe,” he said on Tuesday. By contrast, Labour frets that economic policy is repeating the historic mistake of the 1930s with “too far, too fast” deficit reduction.

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