Those who think Bank of England governor Andrew Bailey is doing a terrible job might soon be able to apply to do it themselves.
The criticism coming his way is understandable. There’s not much doubt that the Bank’s monetary policy committee (MPC) was too slow to raise interest rates when the global news flow looked remarkably sunny, if only by comparison to today.
But two things. One, that problem predates Bailey. His predecessor Mark Carney had any number of opportunities to lift rates from nearly zero.
He fluffed it. Emergency interest rates remained in place long after the emergency had receded.
Second, it’s not clear that putting rates up then would have done anything to reduce inflation that is largely a result of Russia’s Ukraine invasion. Vlad Putin is not on the MPC, Bailey might note, as helpful as that might have been.
No, the advantage of having raised them then would be that the Bank at least had something to cut if faced with a looming recession.
So some of what is coming the Bank’s way is harsh. He has an incredibly difficult job.
The FT’s Lex column today weighs in: “The deference its forecasters show to government policies creates an impression of political subservience.”
Should we be shocked that the Bank is, for all its mooted independence, mostly a tool of government policy?
I don’t think we should. Its job is to help retail banks manufacture the money that the government says it needs. It’s still doing that, just at greater cost. Those costs might even be peaking.
Bailey might not be around to take credit for that.
