Carney: ‘No problem with BoE’s independence’
There is no cause for concern around the Bank of England’s ability to exercise the independence given to it on a statutory basis, the Bank’s governor Mark Carney has said.
Responding to a question on 24 November from Treasury select committee chairman Andrew Tyrie, who asked if there was any “backseat driving or concern around the Bank’s ability to be independent”, Mr Carney said: “Policy independence is at the heart of ensuring that we can achieve our objectives.”
Mr Carney also said that pressure on central banks had increased in recent years, which appropriately have been subject to intense scrutiny since the economic crisis.
This, he said, had led to central banks’ independence being challenged in the US.
However, Mr Carney paid tribute to the system of “constrained discretion” in the UK, where the banks do not have independence in setting the Bank’s goals, which are set by parliament.
“The Bank acts within those remits to achieve its objectives. We have operational independence, and a strict and comprehensive set of requirements to explain what we are doing and how we are trying to do it, with accountability at its core,” the governor said.
The Bank of England Bill, which is currently at the House of Lords stage of the legislative process, is an opportunity to further clarify, reinforce and confirm the framework that has served the country well, Mr Carney added.
He also said that he did not foresee an abolition of cash. “Cash use continues to grow in this economy,” he said. “We have a responsibility to think how the economy will evolve, with a potential role for digital money alongside cash, but there are no plans to abolish cash.
“The question in my mind is when to raise interest rates. In an ideal world the role of the Bank is to make sure that people do not worry about inflation or deflation, or about their financial system or boom/bust cycle, and get on with more important things in life.”
Adviser view
Julian Stevens, principal of Bristol-based Harvest Financial Investment Management, said: “I have not sensed any problems with central bank independence, and there is no reason to suspect the Bank would not handle the powers in a responsible manner. I lauded Gordon Brown’s decision to hand over the power to set the base rate to the Bank of England.”
