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.)