© Reuters. Britain’s Foreign Secretary and Conservative leadership candidate Liz Truss attends her campaign kick-off event, in London, Britain July 14, 2022. REUTERS / Toby Melville
LONDON (Reuters) – A top Bank of England official has opposed a suggestion from a leading candidate to become Britain’s next prime minister that the government should set a “clear direction”. ” for monetary policy.
Michael Saunders, one of nine members of the rate-setting Monetary Policy Committee, said the foundations of Britain’s monetary policy framework were best left unaffected by the Conservative leadership candidates. player.
Foreign Secretary Liz Truss, one of the frontrunners to succeed Boris Johnson, said at the weekend she would “set a clear direction” on monetary policy.
“The government very clearly does not set a direction for monetary policy. It is set by the independent MPC to achieve the 2% inflation target … and that is fundamental within the framework of the UK. “, Saunders told the audience at the Founding Events Resolution in London.
“There is always a debate about whether interest rates will go up or down. But the foundation of the UK’s monetary policy framework is, in my opinion, really important and best left untouched.”
Saunders said Britain’s monetary policy credibility was at stake.
“The MPC’s ability to ease monetary policy promptly and effectively during the 2008-09 recession and during the pandemic … depends on the reliability of that policy framework.”
Without that credibility, the BoE’s efforts to stimulate the economy will be less effective, Saunders said in a question-and-answer session after a speech in which he said interest rates could hit 2% in a year.
Rarely do valuers criticize politicians although in 2016 then-governor Mark Carney said he would not “take instructions” from politicians after the Prime Minister at the time, Theresa May, says BoE policies have “bad side effects” and will have to change.