Wednesday, June 18, 2008

Laurel & Hardy look to pass the buck to the BOE

Darling sets out new Bank remit

Chancellor Alistair Darling has outlined plans to give the Bank of England new responsibilities in his Mansion House speech. Speaking in his first keynote address to City chiefs, the chancellor said the Bank will now also be accountable for the UK's financial stability. This is in addition to its statutory objective of setting interest rates. The radical new measures come in the wake of the collapse of Northern Rock amid global credit problems.

Posted by jack c @ 10:07 PM (946 views)
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5 thoughts on “Laurel & Hardy look to pass the buck to the BOE

  • So, if I get this right, the chancellor and King are saying that if people ask for above inflation pay rises, they threaten to raise rates … ?

    Why do I feel like this should be a dilemma but its actually a no brainer!!

    Get stuck in …

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  • crash bandicoot says:

    “But he added that no monetary policy could prevent the current effects of rising food and energy prices on living standards or the reluctance of banks to lend to house buyers, which is causing the ratio of house prices to incomes to fall.”

    Might as well try no monetary policy then, oh what’s that? We are already Mr Branchflower?

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  • Also from BBC Business –

    Sir John Gieve is to stand down early as Deputy Governor of the Bank of England, the BBC has learned.

    He is in charge of the Bank’s operations responsible for the stability of the financial system.

    Sir John’s departure comes as the Treasury moves to strengthen the Bank’s financial stability role.

    The surprise announcement was expected to be made officially on Thursday. The Bank’s chief economist Charles Bean is expected to be named a deputy governor.

    Mr Bean will take charge of the Bank’s monetary policy side, replacing the other deputy governor, Rachel Lomax.

    It is unclear who will replace Sir John.

    In a statement, the Bank of England said: “Sir John Gieve has decided he will leave the Bank next year.”

    Sir John also issued a statement, saying he would step down once changes he had been overseeing to the Bank’s financial stability role were in place.

    He said the role of both the Bank of England and its deputy governor for financial stability would be changing from spring 2009, including taking on the “key” role in dealing with failing banks.

    While he fully supported the changes, he said: “Once the legislation is in place, building up the new capabilities in the Bank will require a long-term commitment.

    “It makes sense for someone else to take on this task who is prepared to commit himself to a full five year term. I have decided therefore to step down at that point.”


    The Bank of England’s senior directors would probably wish the new financial stability Deputy Governor to be Paul Tucker, the Bank’s executive director in charge of markets.

    The Treasury is refusing to comment on the changes.

    Sir John was savaged when interrogated last autumn by the Treasury Select Committee for allegedly being insufficiently on top of the crisis at Northern Rock. His colleagues regarded the attack as unfair.

    However Sir John is not a markets specialist. And it is thought that the Treasury wants someone with greater technical knowledge in charge of an expanded financial stability division at the Bank.

    Sir John was appointed Deputy Governor in January 2006 and has two and a half years of his term to run.

    His appointment was pushed through by Gordon Brown, when he was Chancellor, in the face of stiff resistance from the Bank of England Governor Mervyn King.

    Mr King recently had a battle with the Treasury to have his preferred candidate, Charles Bean, appointed as the replacement for Ms Lomax

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  • Of course, that’s the answer – a Financial Stability Committee. Wish I’d thought of that one. Merv says that no monetary policy could prevent the problems we’re facing. In other words the problems aren’t his fault, and any decision of the MPC has had little or no effect anyway. Maybe that’s because the MPC hasn’t been working in tandem with a Financial Stability Committee.

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  • Surely this is just a way to let the MPC lower interest rates more easily, since inflation is no longer their one and only target?

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