Willem Buiter is shocked that UK prime minister Gordon Brown, along with his finance minister Alastair Darling, might attempt to have any influence at all over the monetary policy of the Bank of England:
I could not believe my eyes. Are they mad or are the Prime Minister and the Chancellor of the Exchequer really trying to nobble the Monetary Policy Committee of the Bank of England through coordinated messages at a joint press conference, two days before a rate setting meeting of the MPC? …
On hearing of this attempted interference by the Prime Minister and the Chancellor in the MPC decision-making process, every red-blooded member of the MPC must have experienced a momentary urge to stick up two fingers at the forces of darkness by raising Bank Rate by 50 basis points just to teach them the meaning of central bank independence…
The Prime Minister and the Chancellor are undermining one of the crowning achievements of the Blair-Brown years – the operational independence of the Bank of England.
Buiter does hint, at the end, there, at the irony involved: it was Gordon Brown himself, in partnership with Tony Blair, who made the Bank of England independent in the first place, as one of the first acts of the brand-new Labour government in 1997.
But of course all senior politicians attempt to influence their central bank to lower interest rates. That’s why it’s a good idea to give central banks independence in the first place. Brown, in 1997, was deliberately constraining his own ability to direct monetary policy. I’ll tie myself to the mast, he essentially told the central bank, and no matter how much I plead as we pass the Sirens, you must make your own independent decisions.
In making that decision, Brown gave up an enormous amount of power – for centuries previously, overnight interest rates had been set by the finance minister personally. Brown hasn’t seriously tried to get that power back; all he’s done is hold a press conference hinting that he’d like to see rates cut. I’ll forgive him that.