Monday, May 13, 2024

Bank of England's Miserable Incompetence


In a recent turn of events, Jacob Rees-Mogg has accused the Bank of England of 'miserable incompetence' over its handling of inflation. This accusation comes amidst a backdrop of rising inflation rates and a growing concern over the Bank's strategies.

The Accusation

Rees-Mogg's criticism is primarily targeted at the Bank's failure to reduce inflation more quickly and its bond-selling strategy. He has accused the Bank of damaging the economy with its interest rate decisions and costing the taxpayer tens of billions of pounds by selling off government debt too quickly. This strategy, known as quantitative tightening (QT), is aimed at reducing the Bank's balance sheet.

The Fallout

The former business secretary's comments have stirred up controversy, especially as rightwing Tories prepare to renew their attacks on the Bank's independence¹. Rees-Mogg's criticism is particularly scathing, stating that the Bank's 'miserable incompetence allowed inflation to peak at almost six times its target rate'.

Furthermore, he has accused the Bank of demanding higher taxes due to its 'hopeless bond trading strategy. He even went as far as to compare the Bank's strategy to Nick Leeson's, who famously bankrupted the London-based bank, Barings.

The Response

The Bank of England has yet to respond to these accusations. However, this incident has highlighted the fractious relationship between the Bank and the right of the Tory party. This tension has been present since Liz Truss's short tenure in Downing Street, during which she considered sacking its top bosses¹.

The Future

As the situation unfolds, members of Conservative Way Forward, a Thatcherite group of Tory MPs, are preparing to launch a report that once more calls into question the Bank's independence. This report focuses on the losses made by the Bank's quantitative tightening policy.

In conclusion, Jacob Rees-Mogg's accusations have sparked a heated debate about the Bank of England's handling of inflation and its independence. As the political and economic landscape continues to evolve, it remains to be seen how this situation will unfold and what impact it will have on the UK's economy.

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