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Why Was The Bank Of England Permitted To Decide Interest Rates?
Member rating: No Rating | Words: | Submitted: Mon Dec 22 2003
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Whither Independence - Why Was The Bank Of England Permitted To Decide Interest Rates? The first substantive economic policy implemented by New Labour after the 1997 election was the decision to grant the Bank of England operational independence. In an unexpected move that shocked journalists, analysts and commentators alike, the Treasury ceded responsibility for interest rate policy to the bank, subject to an externally imposed inflation target. Though the economic justification for granting the bank independence was entirely sound, in retrospect, the government's political motives were equally as important. Regardless of the motivation, six years later, the decision to grant the Bank of England is regarded by many, as New Labour's most successful and expedient economic policy. The decision to grant the Bank of England operational independence was regarded as "an astonishingly bold start for a new chancellor"1. However, the idea of an...
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