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| MPs to review Bank of England's low interest rates since crash MPs to review Bank of England's low interest rates since crash | |
| (about 1 hour later) | |
| The Bank of England’s policy of near zero interest rates since the 2008 financial crash will come under scrutiny by MPs in a far-reaching probe that could lead to calls for changes to the central bank’s remit, it was announced on Thursday. | The Bank of England’s policy of near zero interest rates since the 2008 financial crash will come under scrutiny by MPs in a far-reaching probe that could lead to calls for changes to the central bank’s remit, it was announced on Thursday. |
| The influential Treasury select committee said it would examine the impact of low interest rates on the economy and whether the bank’s monetary policy committee had run out of ammunition. | The influential Treasury select committee said it would examine the impact of low interest rates on the economy and whether the bank’s monetary policy committee had run out of ammunition. |
| The review comes in the wake of Theresa May’s comments at the Tory conference that low interest rates and the £435bn programme of purchasing government bonds, known as quantitative easing, had “bad side effects”, sparking concerns that ministers wanted to bring the central bank back under Treasury control. | The review comes in the wake of Theresa May’s comments at the Tory conference that low interest rates and the £435bn programme of purchasing government bonds, known as quantitative easing, had “bad side effects”, sparking concerns that ministers wanted to bring the central bank back under Treasury control. |
| It has also become obvious in recent months that the UK looks set for another year of rock bottom rates, angering powerful lobby groups of pensioners that have complained about only receiving meagre returns on their savings. | It has also become obvious in recent months that the UK looks set for another year of rock bottom rates, angering powerful lobby groups of pensioners that have complained about only receiving meagre returns on their savings. |
| Andrew Tyrie, the Tory MP who chairs the committee, said he also wanted to investigate the “unintended consequences” of maintaining the bank’s base rate at 0.25% and how much it had increased the incentive for households to put extra money aside. | Andrew Tyrie, the Tory MP who chairs the committee, said he also wanted to investigate the “unintended consequences” of maintaining the bank’s base rate at 0.25% and how much it had increased the incentive for households to put extra money aside. |
| Seven years of government bond purchases by the bank, which amount to £435bn, will also be questioned by MPs. Tyrie said the committee wanted to consider the stimulating effect on the economy of extending the bond buying programme to corporate bonds. | Seven years of government bond purchases by the bank, which amount to £435bn, will also be questioned by MPs. Tyrie said the committee wanted to consider the stimulating effect on the economy of extending the bond buying programme to corporate bonds. |
| “Interest rates are stuck near zero, the Bank of England has used increasingly unconventional forms of quantitative easing, and inflation has been below the 2% target for three years,” he said. | “Interest rates are stuck near zero, the Bank of England has used increasingly unconventional forms of quantitative easing, and inflation has been below the 2% target for three years,” he said. |
| “The efficacy of monetary policy or otherwise, its unintended consequences, and its prospects, need careful examination.” | “The efficacy of monetary policy or otherwise, its unintended consequences, and its prospects, need careful examination.” |
| The review is likely to dismay the bank’s governor Mark Carney, who has assured Tyrie and MPs on the committee on several occasions that the monetary policy committee, which he chairs, has considered all the consequences of its actions and followed the only path open to it. | The review is likely to dismay the bank’s governor Mark Carney, who has assured Tyrie and MPs on the committee on several occasions that the monetary policy committee, which he chairs, has considered all the consequences of its actions and followed the only path open to it. |
| Threadneedle Street has come under fire from pensioner groups and savers who argue that it has favoured borrowers over savers by keeping interest rates low. | Threadneedle Street has come under fire from pensioner groups and savers who argue that it has favoured borrowers over savers by keeping interest rates low. |
| The committee wants to test how much savers have found themselves pumping even greater funds into their pensions and savings plans to make up for the lost interest, possibly depressing consumer spending and business investment as a result. | The committee wants to test how much savers have found themselves pumping even greater funds into their pensions and savings plans to make up for the lost interest, possibly depressing consumer spending and business investment as a result. |
| Some thinktanks urged Carney to raise interest rates in 2014 once the UK economy began to recover strongly from the banking crash. But a succession of shocks, including the recent Brexit vote result, have persuaded Carney and his nine-strong committee to reject these calls and inject further funds to stimulate the economy. | Some thinktanks urged Carney to raise interest rates in 2014 once the UK economy began to recover strongly from the banking crash. But a succession of shocks, including the recent Brexit vote result, have persuaded Carney and his nine-strong committee to reject these calls and inject further funds to stimulate the economy. |
| In August, following a panicky reaction to the Brexit vote by businesses and consumers, the Bank cut the base rate from 0.5% and added another £60bn to its quantitative easing programme. | In August, following a panicky reaction to the Brexit vote by businesses and consumers, the Bank cut the base rate from 0.5% and added another £60bn to its quantitative easing programme. |
| Tyrie said he was concerned about a series of attacks on the Bank and wanted to consider further safeguards to protect its independence | Tyrie said he was concerned about a series of attacks on the Bank and wanted to consider further safeguards to protect its independence |
| He said: “The Treasury committee will continue to act as a safeguard on the operational independence of the Bank. The Treasury indemnity, which underpins parts of the Bank’s monetary policy, could all too easily encourage the Treasury, or politicians, to put undue pressure on the Bank. The committee will examine the risks of that, too.” | He said: “The Treasury committee will continue to act as a safeguard on the operational independence of the Bank. The Treasury indemnity, which underpins parts of the Bank’s monetary policy, could all too easily encourage the Treasury, or politicians, to put undue pressure on the Bank. The committee will examine the risks of that, too.” |