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Anorak | Credit Crunch: Northern Rock Challenges Bank of England’s Independence

Credit Crunch: Northern Rock Challenges Bank of England’s Independence

by | 27th, September 2007

credit-crunch-1.jpg AS Anatole Kaletsky points out in the Times today there’s one thing that will disappear (if in fact it ever existed) as a result of the credit crunch and the Northern Rock goings on: the Bank of England’s independence.

It was, you may recall, almost the first thing Gordon Brown did on becoming Chancellor in 1997, making the BoE independently responsible for the setting of interest rates. They were given a target of 2% inflation and told to get on with it, as opposed to the earlier system when it was the Chancellor who actually decided the short term interest rates.

So far so very god but this independence took something of a knock when the Chancellor some years later changed the measure of inflation that that 2% target should hit. From one that included housing costs to one that did not….just as housing prices were climbing strongly and would have indicated that interest rates should

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Posted: 27th, September 2007 | In: Money Comments (4) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink