The Bank of England’s (BoE) post-financial crisis loose monetary policy may have had “unintended consequences”, according to the head of the Treasury Select Committee (TSC).
TSC chair and Conservative MP Andrew Tyrie is set to launch a new inquiry into post-2008 central bank policy, which will investigate how effective low interest rates and accommodative instruments such as quantitative easing have been.
Tyrie said: “The efficacy of monetary policy or otherwise, its unintended consequences, and its prospects, need careful examination.”
While low interest rates have been used in an attempt to stimulate growth in the last eight years, a growing global backlash has emerged against the effects on savers.
Prime Minister Theresa May was the most prominent critic in recent months, saying a “change has got to come” to policy which made savers “poorer” in her speech to the Conservative party conference.
Quantitative easing – buying bonds to push money further into the economy – has been criticised in particular for boosting asset prices while not helping those at the bottom end of the economy, who generally do not hold as many assets.
She was later criticised for a perceived threat to central bank independence – and compared to Donald Trump’s Twitter assaults on the Federal Reserve – which could potentially set her on collision course with the TSC.
BoE governor Mark Carney defended the Bank from interference. He said: “We are not going to take instruction on our policies from the political side.”
Tyrie has reiterated the TSC’s support for the Bank’s autonomy, saying, “The Treasury Committee will continue to act as a safeguard on the operational independence of the Bank. The Treasury indemnity, which underpins parts of the Bank’s monetary policy, could all too easily encourage the Treasury, or politicians, to put undue pressure on the Bank.”
The inquiry will also look at the prospects for interest rates after the BoE held rates at the last meeting of the Monetary Policy Committee.