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The FT is reporting that British Chancellor of the Exchequer George Osborne will give Mark Carney, the central banker set to take over as the head of the Bank of England in June, more flexibility with monetary policy than the BoE currently has.That means changing the remit of the Bank of England.
The British government has come under fire for its policies of fiscal austerity lately as the economy continues to worsen.
According to the FT report, instead of reviewing fiscal policy, Osborne will stick to “fiscal conservatism and monetary activism.”
FT correspondents Chris Giles and George Parker have the scoop:
Treasury officials are discussing proposals to change the remit of the bank to coincide with the arrival of Mr. Carney as the governor in July, reflecting frustration at what was seen as previous BoE intransigence.
In the Budget, the chancellor renews the inflation-targeting remit of the BoE and this gives Mr Osborne an opportunity – already sanctioned by Sir Mervyn King, the outgoing governor of the BoE – to review the 2 per cent inflation target and the bank’s operations.
Options include giving the Monetary Policy Committee greater time to bring inflation back to the 2 per cent target, giving the BoE a Federal Reserve-style dual mandate to target both employment and inflation, and even targeting cash spending in the economy rather than inflation.
Changing the central bank’s remit has been a topic of discussion lately – ever since the announcement that Mark Carney, who has a strong track record with experimental monetary policy as head of the Bank of Canada, was set to take over the BoE.
Given the state of the British economy, the debate over both fiscal and monetary policy is hot right now.
It looks like the British government is hoping new monetary policy can shoulder the burden of reviving economic activity.
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