Inflation: Why has it come back? And what can be done?
Publication date: Wednesday 26th April 2023
Bank of England must Bear the Blame for UK Inflation, says former government adviser
New Politeia study calls for greater accountability by the Bank with limits on money growth and reformed Open Letter system
In Politeia’s next publication, Inflation: Why has it come back? And what can be done? –Tim Congdon shows that a marked acceleration in money growth in 2020 and early 2021 preceded and was responsible for the UK’s marked acceleration in inflation in 2022 and 2023. He blames the rise on inflation on the Bank of England.
Professor Congdon, who is Chairman of the Institute of International Monetary Research associated with the University of Buckingham, and has himself been a member of the Treasury Panel of Independent Forecasters, calls for greater accountability by the Bank of England. He also advocates new limits on money growth in the Governor’s Open Letters. In particular, the study recommends:
1.The Open Letter system should include references to money (on the M4x definition). The Governor of the Bank of England should be required to explain why very rapid money growth or money contractions will not lead to inflation outcomes far from the permitted band either side of the 2 per cent inflation target.
2.Large overshoots or undershoots on the inflation target should result in the automatic resignation of the Governor and the Deputy Governor for monetary policy.
3.All Monetary Policy Committee members should be free to refuse their signature to the MPC majority Monetary Policy Report and such refusal should not lead to their resignation from the MPC.
4.The task of making appointments to the MPC should be taken away from the Treasury and transferred to a newly appointed committee with the best interests of the MPC at heart. In line with practice in other countries all MPC members should be UK citizens.
Congdon adds that hard questions need to be asked of senior Bank officials about Andrew Haldane’s departure from the Bank of England in early 2021. Haldane was, says Congdon ‘much more right about the economy in his macroeconomic view than the MPC consensus. If pressured to resign in the cause of MPC unanimity, that was utterly wrong. The study concludes by proposing the bank include on its dashboard details of the quantity of money in circulation. As Professor Congdon says ‘The quantity of money must be on the central bank dashboard. If it is not there, central bankers will be as ignorant and dangerous as people who drive cars without looking at the speedometer’
Notes to Editors
Notes to Editors
1. Inflation: Why has it come back? And what can be done? by Tim Congdon will be published by Politeia, 55 Tufton Street, London, SW1P 3QL on Wednesday, 26 April 2023.
2. Tim Congdon is Chairman of the Institute of International Monetary Research, which he founded in 2014, associated with the University of Buckingham where he is a professor of economics and teaches a course on ‘Money, banking and central banking’. He has served as a member of the Treasury Panel of Independent Forecasters (“the wise persons”), which advised the Chancellor of the Exchequer in a successful period for UK macroeconomic policy.
3. Established in 1995, Politeia is an independent, non-partisan think-tank providing a forum to discuss economic, constitutional and social policy with a particular focus on the role of the state in people’s lives.
4. Contact:Professor Tim Congdon (email@example.com; tel 01452 830840 or 07522 853416.
Politeia Press – firstname.lastname@example.org