Bank of England economist to highlight bank shortcomings

Bank of England economist to highlight bank...The Bank of England’s chief economist Andy Haldane is set to highlight the failure of the bank to examine banking issues prior to the financial crisis.

Mr Haldane will raise concerns monetary policymakers did not take the right steps in attempting to prevent the crisis and will warn that “collective blind-spots” may have been to blame.

The comments are expected to come during a forthcoming speech about the psychology of central banking, when the economist will stress that he will be keeping a close eye on inflation in the UK and whether or not it is set to fall below the Bank of England’s target rate.

However, he will discuss the actions of the monetary policy committee (MPC) and the evidence of a number of shortcomings prior to the collapse of Northern Rock and the Lehman Brothers.

In particular, he will highlight a failure to prioritise key banking topics on the MPC agenda.

“For the decade prior to 2007, banking issues did not get much of a look-in. They typically accounted for only around two per cent of MPC discussion time during the Great Moderation. With hindsight, given emerging pressures in the banking sector, this was a collective blind spot,” Mr Haldane is expected to say at a Royal College of Medicine conference.

“It is too soon to tell whether any collective blind spots remain. But compared with the pre-crisis period, the Bank today has two extra pairs of policy eyes through the prudential regulation authority and financial policy committee.”

The Bank of England recently suggested the base rate of interest is likely to remain at its record low of 0.5 per cent for the foreseeable future because inflation is set to drop below one per cent at the start of next year.

A government target is currently aiming to ensure an inflation target of two per cent on the consumer prices index.

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