Britain’s new Chancellor of the Exchequer will meet the Bank of England governor every week to coordinate the UK’s monetary and fiscal policy responses to the energy crisis, the Treasury said.
(Bloomberg) —
Britain’s new Chancellor of the Exchequer will meet the Bank of England governor every week to coordinate the UK’s monetary and fiscal policy responses to the energy crisis, the Treasury said.
At his first meeting with Governor Andrew Bailey as chancellor, Kwasi Kwarteng also “affirmed the government’s long-standing commitment to the Bank of England’s independence and its monetary policy remit.”
On Twitter, he went further to declare that the BOE’s independence is “sacrosanct” as the pound crashed to a new 1985 low.
The remarks seemed to row back from suggestions from Prime Minister Liz Truss that the central bank’s mandate needed a review and potentially a new target. Those warnings have contributed to investor concerns about UK assest that helped push the pound down to its lowest level since 1985.
Bailey, in testimony before Parliament, said he’d welcome a review as part of a regular process to improve policymaking. He also signaled an understanding of the new government’s ambition to boost economic growth and productivity, something that the BOE has noted has been lagging for years.
“We’ve had low trend growth, low productivity for at least 10 years,” Bailey told the Treasury Committee on Wednesday before meeting the chancellor. “It goes back before the financial crisis. There’s no question that if we’re to address that then growth is important.”
Kwarteng’s comments gave no suggestion about a major change to the BOE’s current mandate, which is to keep inflation to 2%. The Consumer Price Index leaped 10.1% in July, marking the first bout of double-digit inflation in four decades and prompting questions about whether the BOE was doing enough to contain a price spiral.
Economists have warned that plans loosen fiscal policy and interfere with the central bank’s effort to get prices under control.
Kwarteng, who was appointed on Tuesday, also confirmed that the government’s energy support package “will require fiscal loosening in the short-term.” Details will be published on Thursday.
Documents seen by Bloomberg show that the energy rescue package could cost up to £200 billion over 18 months. Both the chancellor and the governor agreed that “getting inflation under control quickly is central to tackling cost of living challenges,” the Treasury said in a statement after the meeting.
Meetings will be held twice a week to begin with then move to weekly, so they can “coordinate closely to support the economy over the coming months” as the government grapples with the energy crisis, the Treasury said.
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