Speaking to Conservative Home, she said the mandate “was set in 1997 in completely different times, and one of the issues round controlling inflation is around monetary policy, and that’s not just about interest rates, it’s also about quantitative easing.”
“I haven’t made any decisions … but I think it’s important that we review our monetary policy settings and make sure it is delivering for the times we’re in now. And of course inflation is a major concern for people.”
She stressed that a mandate review would not impinge on the BOE’s independence to set policy. The BOE itself was planning to look at options in early 2020 before the pandemic, and both the US Federal reserve and the European Central Bank made remit changes in 2020.
“Are we really saying that the mandate Gordon Brown set in 1997 is fixed in stone forever? I mean that seems an extraordinary claim,” Truss said.
“It’s always been the case that the Bank of England operate within the mandate set by the chancellor. And what I’m saying is that should be reviewed.”
The most basic lesson successful politicians learn is to give the people what they want. That generally means more perks, spending and social programs. That’s especially true when inflationary pressures are high, and many people are worried about paying for basic necessities. Rishi Sunak is behind in the race for Prime Minister, and it is no coincidence he is running on a program aimed at responsible spending. Liz Truss has the benefit of being a relative outsider. She is opining on a wide array of topics, but the primary theme is more spending.
Laying the blame for inflation at the feet of the Bank of England is part of that strategy and it’s likely she will be the next Prime Minister as a result. Well played. However, leadership battles take place outside the realm of the possible. Embarking on big spending programs, when inflation is already high is not a recipe for reducing demand.
The fact the Pound does not exist in a vacuum was graphically illustrated in today’s trading. It was initially working on a key day reversal but reversed intraday to close mostly unchanged. The threat of a US recession is sapping enthusiasm for outsized US rate hikes even as the UK is facing the prospect of additional stimulus from the new administration. At present the Pound is in the ascendency but some concrete good news will be required to fuel more than short term steadying.
The FTSE-250 has unwound the short-term oversold condition and is now at the first area of potential resistance represented by the 1000-day MA and the sequence of lower rally highs. The falling wedge characteristic which has been forming over the last four months is a potential type-2 bottoming pattern. A clear break of the downtrend will be required to reignite medium-term bullish interest.