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Bailey downplays comments on British central bank independence

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The Governor of the Bank of England, Andrew Bailey, rejected suggestions from the favorite to become the next British Prime Minister, Liz Truss, and her supporters, according to which the Government should have a greater role in the functioning of the central bank.

At a time when inflation is set to top 13% by the end of this year – its highest level since 1980 – Truss has said he wants to set “a clear direction of travel” for monetary policy and has promised a review of the powers of the Bank of England.

One Truss ally, Attorney General Suella Braverman, has gone so far as to say the review would challenge the BoE’s exclusive powers to set interest rates.

Bailey responded by saying it was “critically important” that central banks maintain their independence, something the BoE had “strong views” on.

“Actually, I don’t think from what I see that… there is a great desire in this country to question the independence of central banks,” he told BBC radio in an interview broadcast on Friday, a day after that the BoE raised interest rates to the highest since 1995 and predicted a long recession.

“But I am very happy to discuss with the new government, you know, the details and the nature of the regime that is in place.”

The BoE received operational independence in terms of monetary policy in 1997, and since then it has been in charge of meeting an inflation target – currently 2% – set by the government.

Truss has said that the time has come to review that mandate and has also suggested that refocusing on money production could be a way to control inflation.

With the UK set to be hit harder than other major economies, where rising energy prices affect consumers and businesses less directly, Bailey has faced harsh criticism of the BoE from Truss. and his supporters for raising rates too late.

Speaking to the BBC, he said he would address those criticisms: “There are some points where yes, I will say ‘sorry, I don’t agree with that point'”.

Bailey also said that he intended to serve his entire term as governor, which ends in 2028.

“I’ve made a commitment. It’s an eight-year term and that’s the part of the structure of the Bank of England’s independence that doesn’t change with changes of government, changes of opinion,” he said.

On Friday, Chancellor of the Exchequer Kwasi Kwarteng, who supports Truss, again criticized the Bank of England.

“If your target is 2% and you are predicting 13%, something has gone wrong. And you have to look at how the bank is organized and what the targets are,” he told Sky News.

Asked if the Bank of England would retain its independence under a Truss-led government, Kwarteng said: “It will absolutely retain its independence.”

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