Theresa May criticises Bank of England for making people poorer
Theresa May has come dangerously close to attacking the Bank of England in unprecedented comments on the tools it is using to support the economy during the aftermath of the financial crisis recession and the EU referendum.
In her speech at the Conservative Party Conference today, May said: "While monetary policy with super-low interest rates and quantitative easing provided the necessary emergency medicine, we have to acknowledge there have been some bad side effects."
May then went on to cite the impact of the Bank's policies on different asset prices and what this meant for borrowers and savers. She concluded the section of her hour-long speech by stating: "A change has got to come, and we are going to deliver it."
Threadneedle Street, like other central banks, is a fierce defender of its independence from the arms of government. Its mandate – to target an inflation rate of two per cent – is set by parliament, though it is allowed to use any and all monetary policy tools as it sees fit in order to achieve that.
Spokespeople for the prime minister clarified after the speech she is not planning to intervene with monetary policy or the independence of the Bank of England.
The comments are nevertheless unusual as senior government figures usually do not comment on monetary policy or the actions of the Bank of England, especially in a way which could be deemed critical.
In quotes: Theresa May's conference speech
Interest rates around the world have hit record lows in the wake of the financial crisis. After the EU referendum the Bank of England took its headline rate to a new all-time low of 0.25 per cent, while pledging to buy another £70bn of government and corporate bonds.
Such policies, by reducing borrowing costs and increasing the value of assets, have been attacked for various reasons. Some believe low interest rates and quantitative easing erodes the values of savings, while helping borrowers, whereas the effect of bond-buying on boosting the prices of equities and property has also been criticised for exacerbating wealth inequality.
The Bank of England did not comment on May's statement.