5 Times Rishi Was Complacent About the Bank of England Missing Mandated 2% Inflation Target mdi-fullscreen

There has been a lot of deserved criticism of the Governor of the Bank of England, Andrew Bailey, for not bearing down on inflation harder, sooner. Every quarter when the Bank of England misses the 2% inflation target by a significant margin the Governor is obliged to write to the Chancellor to explain why they have failed to meet their mandate.  The Monetary Policy Committee mandate requires an exchange of open letters between the Governor of the Bank of England and the Chancellor of the Exchequer if inflation moves away from the target by more than 1 percentage point in either direction. During his time as Chancellor, Rishi exchanged 8 letters with Andrew Bailey, with 5 of them being sent whilst inflation was over the 2% target…

Here are Guido’s top 5 quotes from these letters over the last 2 years, illustrating the relaxed technocratic line taken whilst inflation was flaming out of control:

  • 06/05/21 – Inflation 2.1% – “This institutional structure helps to ensure that inflation expectations remain anchored and that monetary policy can play its role fully.”  In theory…
  • 23/09/21 – Inflation 2.9% – “The target is symmetric: deviations below the target are treated the same way as deviations above the target. This institutional structure helps to ensure that inflation expectations remain anchored and that monetary policy can play its role fully.” Yes, but it is going up chaps…
  • 16/12/21 – Inflation 5.4% – “The target is symmetric: deviations below the target are treated the same way as deviations above the target. This institutional structure helps to ensure that inflation expectations remain anchored and that monetary policy can play its role fully.” So worried about inflation being more than double the target rate was Rishi that he again cut ‘n pasted the last technocratic word salad from the the letter from the previous two quarters.
  • 17/03/22 – Inflation 7.0% – “The UK’s strong and credible macroeconomic policy framework and institutions continue to support the economic recovery from Covid-18, which is why at Budget in October I reconfirmed the MPC’s remit and the primary objective of price stability as measured by the 2% CPI target.” “Credible”? Inflation is triple the target rate, not even a scolding or an attempt to convey a sense of urgency?
  • 16/06/22 – Inflation 9.4% – “I retain full confidence in the Bank of England, and I know and expect that you and the other members of the MPC will take the action necessary to get inflation back on target and ensure inflation expectations remain firmly anchored.” He’s missed the target for five straight quarters and inflation was running at nearly five times target. A well deserved bollocking for the Governor? No, Rishi said he had full confidence in him and his colleagues at the Bank.

Throughout their exchanges Rishi did not at any time criticise the lack of action taken by the Bank of England, on the contrary he commended them and noted only what had occurred. Both he and the Bank were behind the curve. Platitudes rather than strictures were delivered to Andrew Bailey. Rishi has been rhetorically concerned about inflation, he didn’t actually do anything about it or even urge the Bank of England to do anything…

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mdi-account-multiple-outline Andrew Bailey Rishi Sunak
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