Rolling coverage of the day’s political developments as they happen
9.31am BST
The Conservative party conference was dominated by what the party said about immigration but one of the most intriguing lines to emerge was what Theresa May said about monetary policy and quantitative easing. In remarks that seemed highly critical of the Bank of England, and its QE policy, she said: “While monetary policy, with super-low interest rates and quantitative easing, provided the necessary emergency medicine after the financial crash, we have to acknowledge there have been some bad side effects.” Downing Street later had to clarify that she was not trying to interfere with the Bank’s independence and that QE policy was a matter for them.
But it would be unwise to think that that is the end of the matter, and this morning a powerful voice has come to the aid of those in Number 10 who think it is time for a QE rethink. William Hague, the former Conservative leader and former foreign secretary, has used his column in the Telegraph to suggest that the Bank of England should raise interest rates or lose its independence. He also lists 10 problems with the Bank’s continued reliance on QE. Here is an extract.
I am not an economist but I have come to the conclusion that central banks collectively have now indeed lost the plot. The whole point of their independence was that they could be brave enough to make people confront reality. Yet in reality they are blowing up a bubble of make-believe money to avoid immediate pain, except for penalising the poor and the prudent …
Some central bankers would mount a strong defence of their approach. They would explain that there is a global glut of savings, so interest rates are in any case kept low by market forces. This is true, but it does not mean those rates have to be driven to zero, or even below zero now in some places, by the authorities …
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Sig Nordal 