Bank of England risks losing kudos - McCafferty

By Ed Conway, economics editor
The Bank of England could lose its credibility and trust if it specified where it thought interest rates were heading, one of the bank's leading policymakers has warned.
In his final broadcast interview before leaving the monetary policy committee, Ian McCafferty issued a warning to those calling for the bank to publish its estimates of where it plans to put borrowing costs in the coming months.The comments may be seen as a challenge to the bank's governor Mark Carney, who has pushed for more opennness from about its interest rate plans.Mr McCafferty told Sky News these exercises could be dangerous."If we were to give a lot of very specific forecasts about where interest rates would be in a year or 18 months on, the economy may not pan out exactly in a way that would justify exactly that policy path," he said, adding that people would base their mortgage decisions on those forecasts, which could turn out to be wrong."And as a result we would then start to lose credibility and trust," he said.
Bank of England risks losing kudos - McCafferty

Ian McCafferty's last interview before leaving the Bank of England
The comments come amid a growing debate, both inside and outside Threadneedle Street, about how open central banks should be about their plans for borrowing costs.Alongside its decision to raise the rate from 0.5% to 0.75% last week, the bank also produced an indication of what it thought the "neutral" level for rates was.Mr McCafferty said giving more detail, or providing the impression that the bank had a precise number in mind, was a hostage to fortune.Mr McCafferty also said Britain's economy is poorer than it would have been had it voted to stay in the EU.
"We have moved from being one of the fastest if not the fastest growing economies in the G7 back in 2015 to the slowest," he said."Has the vote made us poorer? That depends if you mean absolutely poorer or poorer than we would have been."I think at this stage it's probably more the latter."Mr McCafferty said that the Labour party's proposals to introduce a productivity target for the bank were not workable."At present we don't have the correct tools to address such structural problems."I think a lot of the underlying tools with which you could affect productivity are very different types of policies to monetary policy.
More from Bank Of England

Bank of England deputy Broadbent sorry for 'offence caused' by menopause comment

What the interest rates rise warning means for you

Checked your sofa? ?691m in old fivers were not exchanged before withdrawal as legal tender

Labour may move Bank of England's headquarters to Birmingham

Gordon Brown turns on Tony Blair over Bank of England independence

KPMG faces fight to retain prized Bank of England audit role

"I also think those those forms of economic policy should be run by democratically elected politicians rather than technocrats such as myself."Mr McCafferty will leave the bank at the end of August, to be replaced by academic economist Jonathan Haskel.
Posted in:
Bank Of England
See also:
Leave a comment
  • Latest
  • Read
  • Commented
Calendar Content
«    Март 2019    »