Bean says changing Bank’s remit on rates will not work

City A.M. Reporter
DEPUTY Bank of England (BoE) governor Charlie Bean yesterday came down against a change in the Bank’s remit.

Though a switch to targeting nominal income (NGDP) rates or levels could help convince firms the BoE was ready to do whatever necessary to lift the UK economy, Bean said, it would be unworkable.

But in questions following Bean’s speech, he appeared to come out in favour of negative interest rates, calling them “blue sky thinking” though he denied the Bank had plans to reduce its policy rate below zero. In the same day, Federal Reserve boss Ben Bernanke made the case for negative interest on reserves held at the central Bank, arguing it would encourage Banks to push more money into the economy. But Bean said a nominal income target would give the BoE an incentive not to actually boost inflation once it had raised market expectations, destroying its credibility. And he said NGDP figures came out too late to react to changes quickly enough.