Monetary Policy

Bank of England’s mandate and role should urgently be reviewed


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Responding to the Bank of England’s decision to raise interest rates to 1.75 per cent, Dr Andrew Lilico, Chair of the Shadow Monetary Policy Committee and economics fellow at free market think tank the Institute of Economic Affairs, said:

“The Bank of England has today announced a rate rise of 0.5 per cent, to 1.75 per cent. With inflation set to rise to 13 per cent and stay at 9 per cent into 2023, interest rates as low as this are clearly inadequate and we should expect further rises soon.

“The Bank and the Johnson government failed to act quickly enough to control this inflation, and the Bank of England’s mandate and role should now clearly be reviewed.

“The Chancellor continues to set the Bank of England a 2 per cent inflation target but the Bank continues to make little effort to keep inflation at that level, except on some vague long-term basis that involves “seeing through” notionally “short-term spikes” in inflation, where “short-term” apparently now means “two or more years” and “spikes” means inflation in the double digits. This should not be considered adequate.

“Control of the price level is a fundamental duty of government in a liberal market economy. The Johnson government has failed in that basic task. Hopefully, the new Prime Minister can do better.”

ENDS

Notes to editors

Contact: [email protected] / 07763 365520

IEA spokespeople are available for interview and further comment.

Further IEA reading:

IEA Shadow Monetary Policy Committee votes to raise interest rates to 1.75 per cent

Inflation: The next threat? by Dr Juan Castañeda and Professor Tim Congdon

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems, and it seeks to provide analysis in order to improve the public understanding of economics.


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