Home > Bank of England, Crazy Loons > Paul Tucker’s Credibility Problem

Paul Tucker’s Credibility Problem

Paul Tucker is leaving the MPC later in the year.  That’s the good news.  Here’s a quote from his speech today which I cannot resist ridiculing:

It is sometimes suggested that independent central bankers are more averse to inflation than to periods of low growth and increased unemployment.

Gee whiz, Paul, really?  Why could that be?

I hope the past few years have demonstrated that, in fact, it is the credibility of the Bank of England’s commitment to price stability that enabled us to provide such exceptional monetary support to help the recovery.

Oh.  So… during a period with the worst real GDP growth on record, and high unemployment, what you’re saying… as you and your colleagues have done in speech after speech… is that what really matters is the Bank’s “commitment to price stability”?

It is unimaginable that, prior to Bank independence in 1997, any government would have been able to hold the policy rate at effectively zero and make a further monetary injection of £375bn without inflationary expectations – and government financing costs – spiralling out of control.

Inflationary expectations… hmmm… wait.  For some reason I am getting the impression that independent central bankers are more averse to inflation than to periods of low growth and increased unemployment.  But it must be the voices in my head.

(Those three sentences really are placed together in that order in his speech, I’m not making this up.  Tucker also has a delicious reference to his definition of the phrase “escape velocity”, with a footnote referencing his remarks in 2011 to the TSC.  It’s hard to know what he is getting at.)

  1. Bill le Breton
    September 26, 2013 at 08:56


    May I add this from Charlie Bean, “If [the Monetary Policy Committee] had tried to offset the impact on consumer prices of, say, sharp movements in import prices… that would necessitate inefficient fluctuations in activity and employment”. (Feb 2013 to an IEA conference http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech640.pdf )

    They may write and rewrite as much as they like all the way into into their retirement: the record shows that they missed both significant falls in NGDP growth in ‘08 and ’11. Even in the above quote the subject is inflation, not NI.

    Tabula Rasa? Could it be that a number of members of the Committee had cut their teeth reviewing and dismissing NI targeting in the 1980s and carried that perspective in their genes?

    • September 26, 2013 at 09:17

      Sometimes it is hard to conclude they are doing anything other than protecting their own reputations.

      Strict-ish inflation-forecast targeting as optimal policy regime says the MPC has done a good just in difficult circumstances. NGPDLT as optimal policy regime says the MPC has failed catastrophically.

      And the MPC tell us time after time that NGDPLT is a bad idea… quelle surprise.

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