David Cameron's economic policy today faces a new attack from a respected central banker. Paul Fisher, head of markets at the Bank of England, appears today to contradict remarks made by David Cameron in his leader's speech at Conservative party conference a week ago.
David Cameron’s economic policy today faces a new attack from a respected central banker. Paul Fisher, head of markets at the Bank of England, appears today to contradict remarks made by David Cameron in his leader’s speech at Conservative party conference a week ago.
Speaking about the Bank of England’s policy of quantitative easing, which has injected money into the economy through the purchase of government bonds, the Financial Times report that:
“Mr Fisher argues there is still sufficient spare capacity in the economy to mute inflationary pressures, giving companies little leeway to raise prices and making employees think twice before demanding large pay rises.”
By contrast, Mr Cameron last week said:
“Right now, the Government is simply printing [money]. Sometime soon that will have to stop, because in the end, printing money leads to inflation. Then the Government will have to borrow it.”
Mr Fisher’s remarks are the latest blow to Cameron’s grasp of monetary policy. Last Friday, within hours of making his speech, Cameron was criticised by two former central bank officials:
“David Blanchflower, who left the bank’s Monetary Policy Committee in May, said Cameron’s speech yesterday was ‘bizarre’ and if put into practice may tip the U.K. into a “depression.” Shamik Dhar, a former Bank of England economist, said ‘at best this is wrong and at worst downright dangerous’.”
It remains unclear whether Cameron would over-rule Bank of England staff on the policy if he became Prime Minister.
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6 Responses to “Central banker contradicts Cameron’s monetary policy claims”
Will Straw
Mark – this isn’t about causing mischief, it’s about scrutinising the economic illiteracy of Cameron. Of course the BoE can’t carry on buying government bonds forever but the fact that we are doing so at the moment with extremely low inflation outlines how severe the recession could have been without government intervention. Cameron is desperate to show that Government is the problem even when it is actually helping. To that extent, Fisher and Cameron’s positions couldn’t be further apart.