The Bank of England’s Governor Mark Carney defended the central bank against accusations from MPs that it, as well as others, are fuelling growing inequality due to their monetary policy actions.
The bank’s governor said politicians are undertaking a “massive blame defection exercise” by suggesting that central banks are to blame.
Speaking in Westminster in front of the House of Commons Treasury Select Committee, Carney responded to criticisms of the perceived negative impacts of low interest rates and quantitative easing thrown at central banks around the world.
“I think it is very important to distinguish between the stance on monetary policy and the reasons why global interest rates are low, and the reasons why inequality has increased across major economies,” Carney said.
“These are caused by much more fundamental factors, and an excessive focus is, in a sense, a massive blame deflection exercise,” he told members of the Committee.
Central banks globally, most notably the Bank of England, the US Federal Reserve, and the European Central Bank have all been attacked by politicians in recent months. The BoE’s monetary policy was even famously accused of having “some bad effects” by Prime Minister Theresa May in her speech at the Conservative Party conference — a comment May was forced to clarify was not meant as an attack on Carney or the independence of the bank.
During his campaign for the presidency, the now President-elect Donald Trump variously blamed the Fed for supporting a “very false economy,” and said “we are in a big, fat, ugly bubble,” during one of the election debates.
Carney dismissed such criticisms, intimating that politicians are looking to push the blame for their own mistakes onto different parties.
A “sense of responsibility”
During the hearing, Carney also took questions from MPs on his recent extension of his term as central bank governor. Carney will stay in his role until the end of June 2019, the Bank of England confirmed in late October, adding a year to his initial five-year term at the helm of UK monetary policy.
He had initially committed to staying until 2018, but following Britain’s decision to leave the European Union, Carney extended his term a further year, allowing him to remain governor until the point when the UK should formally have left the EU.
Carney told MPs that he was asked to extend his term to a full eight years, but was unwilling to do so because of his family circumstances. The extra year was taken out of a “sense of responsibility” to the UK in a difficult period.
“I am extending in order to provide continuity, to support this crucial process, and it’s no more complicated than that” he said.
When asked if he thought that his change of plans had added to uncertainty in the British economy, Carney was dismissive, saying that “there are far bigger issues adding to uncertainties in the global and UK economy.”