Sunday, September 13, 2009
Bank’s policy credibility ebbing
I suppose we should remember that Blanchflower was not on the MPC when the infamous August 2005 rate cut was voted in, against King's wishes. At that time, house prices were stagnant and inflation was rising - it is accepted that this vote alone further stoking the credit boom for another two years by sending the wrong signal and creating a strong moral hazard. But what Blanchflower was advocating in the autumn last year was an early rate cut to head off any downards slip in house prices. This too would have been another crass policy error so in many ways it may have been a good that thing that he didn't get his wish granted.