Newspaper article The Evening Standard (London, England)

Hague's Got a Cheek Laying Woes of UK at the Bank's Door

Newspaper article The Evening Standard (London, England)

Hague's Got a Cheek Laying Woes of UK at the Bank's Door

Article excerpt

Byline: ECONOMIC ANALYSIS Russell Lynch

HERE'S a little story that shows what financial markets think of central bankers, and what they think of politicians. On May 6, 1997, when the Bank of England was granted independence, the price of Government bonds soared.

Traders piled in because they believed that taking the interestrate levers out of the hands of MPs, who might be more concerned with the date of the next election than with the wider good of the economy when deciding whether to lop a few quid off everybody's mortgage, was a good idea. This was the City saying to MPs: "We trust the Bank more than you to control inflation, and government debt looks a better bet as a result."

The reason we and dozens of other countries have allowed their central banks a free hand is that they do a better job at delivering low and stable inflation. So it's depressing that as senior a figure as William Hague should suddenly put independence back on the table in an incendiary newspaper column. Conjuring up a populist storming of the Threadneedle Street barricades, Hague (pictured) says the "much-vaunted" era of central banking independence "will come, possibly quite dramatically, to an end" unless quantitative easing and its painful side-effects are abandoned.

His intervention so soon after Theresa May's conference speech highlighting the hardship to savers from ultra-low rates and QE is a barely-disguised warning shot at the "independent" Bank just three weeks before it decides whether to cut rates again or not.

Clearly, politicians are less keen on Bank independence when things are going badly. The former foreign secretary's article has overtones of Gordon Brown's hamfisted move onto the Old Lady's turf in 2008, when he said that "because we've got low inflation, we can cut interest rates". Hague also clearly has a short memory. He accuses central banks of "blowing up a bubble of makebelieve money to avoid immediate pain", but little more than a year ago, he sat in a Cabinet that made a fetish of cutting the deficit, constantly reminding us that its fiscal machismo allowed the Bank to maintain its ultra-loose monetary policy. …

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