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Nov 17, 2016

The Guardian | World | Economics | Business Live - November 17, 2016: Ed Balls Calls for Reforms to Bank of England Independence - Business Live
Angela Monaghan

Balls on Today: The key quotes

Former shadow chancellor Ed Balls has told the Today Programme that central bank independence is ‘unfinished’ business -- and that no country has the perfect central bank set-up yet.
He pointed out that central bankers have played a vital role since the financial crisis struck; but now have an awful lot of power:
Over the last five years, we have hugely relied on central banks on both sides of the Atlantic to sustain growth, to keep our economies growing, and yet at the same time they’re under big attack. In Congress, the Fed being heavily criticised. We’ve seen not just MPs attacking Mark Carney and the Bank of England, but even our Prime Minister a few weeks ago slapping Mark Carney down.
I think the case for independent central banks is as strong as it’s ever been. At a time of economic uncertainty but also great political risk, we need the Fed and the Bank of England to play these roles and we don’t want them to be politically criticised, but, the reforms we’ve seen over the last few years have hugely concentrated power in central banks.
That’s why Balls believes the Bank of England needs more accountability to parliament, especially as its monetary policy has such a big impact on the distribution of wealth
It’s good to have a financial policy committee making decisions about our whole financial system, but frankly, there’s not sufficient accountability, there’s not a clear target, they’re making [decisions] that are quite distributionally politically sensitive.
If things go wrong, then politicians would have to step in and say there’s a gap in the system. What we need is a systemic risk body chaired by the chancellor, which is overseeing the whole system and setting a mandate for the Bank of England and also there if a crisis starts to build, that’s a gap we need to fill.
Balls is adamant that central banks have been doing a good job, at a very difficult time, without enough support from the government:
The low interest rate policy over the last few years is the only thing that has stopped our economy slipping back into depression. They’ve been trying to meet a target for low inflation, they’ve been undershooting because of the deflation forces in the economy. They’ve been doing their job. We actually say, what we need to have is a better dialogue between central banks and governments. If government had done a bit more work to support the economy through infrastructure spending, that would have made it easier for the Bank of England.

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