Home > Crazy Loons, Monetary Policy > Regime Change Rumour Mill: Osborne rejects NGDP Target

Regime Change Rumour Mill: Osborne rejects NGDP Target

George Parker and Chris Giles report that Osborne’s economic adviser Rupert Harrison has failed to find enlightenment:

During his tour of Boston, New York and Washington, Mr Harrison is understood to have ruled out the radical option of changing the BoE’s remit to include a growth target based on nominal GDP – cash spending in the economy.

[The Treasury is] considering whether the existing 2 per cent inflation target gives sufficient flexibility or whether the Treasury could tell the Bank to target that rate over a longer horizon to help growth.

Game over?  It looks that way.  “Sufficient flexibility“?  Give me a break.  The cult of the central banker lives on, our chosen experts carefully seeking the right path to nominal salvation.  In other FT news:

King speaks out to halt sterling’s fall

BoE governor says currency is now ‘properly valued’

Good luck, everybody.  Blogging will be light for a while.

  1. March 15, 2013 at 13:46

    He was in Boston, so he could easily have stopped by to visit Bentley U and talk with you know who!

  2. ChrisA
    March 17, 2013 at 10:17

    Game theory says Osbourne should go with NGDP targeting even if he has doubts. He must know that if he can’t get the economy moving again he is toast even if by some miracle the conservatives get in again. The only other idea out there is fiscal expansion make work projects and he has been so publically against this that he wouldn’t be able to change now. Its the only lever left to pull for him. Good thing for him is that it will probably work.

    • March 17, 2013 at 12:01

      I’d agree, but would speculate:

      a) HM Treasury is stuck in the “creditism” model, or that bank lending is the transmission mechanism of monetary policy – as probably is Carney.

      b) Central bankers (including Carney?) will lobby Team Osborne against NGDPLT. They need discretion, maybe to fight bubbles, maybe also for creditist reasons, maybe just for self-interested reasons per your other comment. And they’ll say NGDPLT is to abandon the fight against low inflation, because otherwise… 1970s!

      • ChrisA
        March 18, 2013 at 05:08

        If Carney is going to be more of the same, why bother recruiting him so heavily and putting out of joint all the noses of the UK establishment? Osbourne used up some political capital there. What change does he want if not more expansionism that the BoE is giving him at the moment?

  3. March 18, 2013 at 08:11

    Good questions, though I’m not sure where Osborne has used up political capital here. Putting the emphasis on MP not FP is useful for him as Stephanie Flanders pointed out, and hooking Carney has only been positive.

    I would say Osborne does want a “pro-growth”, or “dovish” BoE. And threatening them with NGDPLT has been a useful trick to get that. Maybe that was Carney’s idea too. He pitches the extreme position… and then can roll back to embrace a more “flexible” inflation target and appear moderate, middle-ground.

    I don’t know. I’m still speculating here.

  1. March 15, 2013 at 20:36

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