MP: Bank of England negligent in its duty
Last week the Treasury Select Committee, of which John Baron has been a member since November 2022, held an evidence session at the Bank of England. Members of the Committee questioned the Governor of the Bank of England, Andrew Bailey, and the Deputy Governors, Sir Ben Broadbent and Sir Dave Ramsden, about Quantitative Easing, Quantitative Tightening, interest rates and inflation.
In Committee, John said,
“…there was a long period when there was clear evidence that inflation was rising. The message we got – not just from the Bank of England, but from central banks generally – was that it was not an issue. When it became clear that it was an issue, it was going to be transitory. When it became clear that it was not going to be transitory, it was going to fall away very steeply – we still have an OBR forecast of 2.9% by the end of the year…Central Banks and the Bank of England have been behind the curve …A month before Ukraine, inflation was on a very sharp trajectory…at 6%. Interest rates were still 0.5%. May I be provocative and suggest that that is a woeful neglect of duty?”
*****
“The reason I ask, if I may, is that this is terribly important when it comes to people. It is not just the language from the Bank of England; it is the fact that people are struggling now…whereas if the Bank had been…more proactive, there might be less pain out there...”
*****
“You rightly say that interest rate policy has a lag effect…we have official inflation forecasts of 2.9% from the OBR and 5%, recently upgraded…from the Bank of England for year-end forecasts of inflation. Yet, given that interest rates take at least six to nine months – you mentioned an 18-month lag – if you believe those forecasts, why are you still raising interest rates?”
John said afterwards,
“I am grateful to the Bank of England for this evidence session, but serious questions remain as to how it has presided over a nasty period of inflation while keeping interest rates too low for too long at the beginning. Had Central Banks been more proactive in containing inflation, there may now be less pain to people worldwide. I am not convinced by all of the responses we received, and look forward to taking this further with my fellow Committee members.”
Notes to Editors:
- The full transcript of the Treasury Select Committee evidence session is online at: https://committees.parliament.uk/oralevidence/13163/pdf.
