BoE economist says Bank not responsible for promoting growth
The Bank of England is responsible for keeping inflation in check and not for ensuring economic growth, the Bank’s chief economist Spencer Dale argued in a speech in Dublin on Saturday (8 September).
Speaking at the annual Money Macro and Finance Conference, Mr Dale, who also sits on the Bank’s Monetary Policy Committee, criticised commentators for having a “Pavlovian-like response” calling for more fiscal easing after any news of weak growth.
He argued: “The extent to which policy should be eased depends crucially on the reasons why output is weak.
“Ultimately, our job is to hit an inflation target not a growth target.”
Rather, he said, weak growth does not necessarily mean that quantitative easing has failed and he has “little doubt that without them our economy would be in a far worse state today.”
He added that prolonged loosening of monetary policy could lead to increases in the risk taking of investors and financial institutions which could sew the seeds of greater problems in the future, as well as delaying some of the rebalancing and restructuring that the economy needs.
He added: “Unless the limits of monetary policy are well understood, a widening gap may develop between what is expected of central banks and what they can realistically deliver.”