The Bank of England was distracted from its main mission of taming inflation by additional objectives and risks damaging its credibility by working on climate-related goals, according to two of the central bank’s former senior staff.
(Bloomberg) — The Bank of England was distracted from its main mission of taming inflation by additional objectives and risks damaging its credibility by working on climate-related goals, according to two of the central bank’s former senior staff.
Paul Tucker, a BOE deputy governor until 2013, warned the central bank is “involved in too many things beyond it core remit” and was too slow to assess the financial threats related to the trouble at Silicon Valley Bank and Credit Suisse.
The BOE “hasn’t been preemptive enough on inflation (and) hasn’t been preemptive enough on various vulnerabilities accumulating in the financial system,” Tucker said Tuesday in a House of Lords hearing. He added that the issue is also a problem for the US Federal Reserve and European Central Bank.
The comments add to criticism of mission creep at the UK central bank after the government handed it responsibility for banking regulation and also set a goal to support efforts to deliver an economy that free of fossil-fuel pollution. That’s on top of its main remit to set interest rates and keep inflation to 2%.
Inflation has lingered in double digits for six months in the UK. Soaring prices were first sparked by the war in Ukraine and snarled supply chains after the pandemic, but policy makers led by Governor Andrew Bailey are concerned about heading off the risk those increases become more persistent and widespread.
John Vickers, a former BOE chief economist, said there is a “reputational risk” from the BOE’s climate goals and called for a “streamlining” of its commitments.
“It does burnish the central bank’s green credentials, which individuals there might welcome, but it dilutes the sense that they’re focused on inflation control,” Vickers said at the same hearing. “I do think that there could be some cost to that.”
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