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Hammond: Bank to retain control of monetary policy

Hammond: Bank to retain control of monetary policy

Hammond: Bank to retain control of monetary policy

  • 19 October 2016
  • From the section Business

Phililp Hammond

Chancellor Philip Hammond has insisted that the Bank of England’s Monetary Policy Committee will remain responsible for monetary policy.

He told the Treasury select committee that the MPC, which sets interest rates, would retain its independence.

That stance was called into question after Theresa May made a surprise attack on the Bank in her speech to the Tory Party conference this month.

The prime minister said “a change has got to come”.

The Bank’s actions – such as maintaining low interest rates since the financial crash – had meant those with assets such as property had got richer, while those without had suffered, Mrs May said.

Mr Hammond was asked what Mrs May’s promised “change” referred to if it was not monetary policy.

He said: “There will be no change in monetary policy. Monetary policy is independently determined, that will continue to be the case.”

Analysis: Kamal Ahmed, Economics editor

The chancellor has said controversial Treasury analysis of the economic shock the UK might face if it left the European Union is now “partially invalid”.

It is a significant break with his predecessor, George Osborne, and with what became known by critics of the Remain campaign as “Project Fear”.

Philip Hammond said some of the assumptions behind the document – which suggested a significant drop in economic growth – had been superseded by events.

Those close to the chancellor made it clear the models were not wrong for the time, but the circumstances had now changed.

It is also clear that Treasury officials still believe that there will be an economic slowdown as Britain negotiates its exit from the EU, a position backed by the Bank of England.

Read Kamal’s blog in full

MPs on the select committee also questioned the chancellor about the impact of Brexit on the economy.

Mr Hammond said they were right to identify that “uncertainty is the big challenge in the next phase of this process”, adding: “It’s a challenge to our economy – there will be a period inevitably of uncertainty until we know the outcome of the negotiations.”

He also tried to calm fears that the financial services sector would be hit hard by Brexit by saying that retaining passporting was important and “would be the ideal outcome”.

Passporting refers to the sector maintaining the same access to the EU’s financial services market as it enjoys through the UK’s membership of the union.

‘Extremely important’

“The reality is that financial services remains our single largest sector; it is responsible for a very large number of jobs straight across the United Kingdom, it’s not London-based industry,” Mr Hammond said.

“The industry knows that we regard it as extremely important, the industry knows that we understand that it has a particular set of challenges as we go into this period of negotiation with the European Union. And I hope the industry knows – it certainly should know – that helping to address these challenges and taking account of these challenges will be a very high priority for the government.”

However, the Chancellor admitted that some banks and financial firms were being “realistic and are looking at other options beyond passporting to protect their interests”.

Source : BBC News – Business

Hammond: Bank to retain control of monetary policy

Hammond: Bank to retain control of monetary policy

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