Oral question asked in the House of Lords, by Lord Saatchi (Conservative). It was answered on Wednesday, 12 November 2008.

Bank of England: Interest Rates

Question: My Lords, is it not rather unfair on the Bank of England that it is routinely condemned these days for being what I think they call behind the curve, by which people mean slow, late, unprepared, and so on? Is it not true that it is like a top general who has been given the wrong orders? Does not the fault lie, as the questions of the noble Lords, Lord Barnett and Lord Newby, imply, with the legislation that created the independent Bank of England, and in particular with Section 11, which concerns the remit? That asks the Bank of England to concentrate exclusively on inflation as the be-all and end-all of economic policy. Do we not now know that it is possible to have what the Bank of England called, contrary to what the Minister said, the largest financial crisis in human history, which has occurred during a period of low inflation? Does not that mean that there must be more to it than Section 11 suggests?

Answer: My Lords, I shall endeavour to be brief in my reply to the noble Lord, Lord Saatchi. Since the independence of the Bank of England was established in 1997, we have enjoyed an unparalleled period of sustained economic growth and low inflation. That is not what I would judge to be being behind the curve; I judge that to be a commendable achievement by the Government and the Monetary Policy Committee of the Bank of England. The outlook is that those policies and practices will continue to be highly effective. The Government do not interfere or intervene in the decision-making of the MPC and will not do so. I draw the attention of the noble Lord, Lord Saatchi, to the IMF report in 2008, which could not have been stronger in its endorsement of the achievements of the Monetary Policy Committee, stating that it should not in any way be amended.

Secondary information

Type: Oral question
Reference: 705 c654-5
Session: 2007-08
Oral question type: Supplementary
Chamber / Committee: House of Lords chamber
Subjects: Bank of England Interest rates Monetary policy Monetary Policy Committee
Link: View this Oral question on www.publications.parliament.uk