The BBC’s Robert Peston has suggested Osborne’s carve-up of the Bank of England (BoE) – which will see the new FPC sit alongside the MPC – is a “sub-optimal” solution because there is no real difference between delivering financial stability and monetary stability.
Drawing on a speech from BoE deputy governor Paul Tucker, Peston said changes in interest rates can be an important driver of “risk premia”, in turn impacting the macro-economic climate.
So rather than separating monetary and financial policy, the Chancellor should consider bringing the two together in the form of a single super-committee, he proposed.
“If he (Tucker) is right that changes in the Bank rate are an important determinant of risk premia – and to be frank all evidence and common sense is with him on this – then maybe the tool kit for delivering financial and inflationary stability should not be divided between two committees, whose activities could be mutually destructive (even when both are chaired by the governor),” wrote Peston.
“Perhaps there should be a single monetary and financial stability super-committee.”
The FPC will be part of the BoE, with responsibility for identifying, reducing and removing systemic risks from the financial system.
