From Stability to Financial Crisis and Back?
Delivering an interesting speech on monetary policy in London today, Kate Barker shared some important lessons from her nine years as an external member of the Bank’s Monetary Policy Committee (MPC).
Ms Barker steps down from the Committee on 31st May 2010, but before leaving hopes that her experiences might inform the MPC over the “difficult” years immediately ahead
An important warning delivered within the speech was that expanding Quantitative Easing (QE) from the current level of £200bn may do very little to boost the UK economy.
Whilst QE has played an important role to date, Ms Barker says that further spending would do little to boost confidence any further.
It will be interesting to see how the MPC decides to proceed with any extension to QE this year, particularly if economic recovery stalls or remains as anaemic as the revised GDP figures for the final quarter of last year suggest.
Ms Barker also admitted that the MPC and others had misjudged the state of the economy before mid-2007 when the financial crisis started. This was an important speech that could provide clues to how monetary policy might be deployed in the future.