Bank of England: Raising rates is outside of “political reality”. Wait… what?

Mark Carney shot back a direct refusal to the BIS’ recommendation to raise rates today, saying “Raising rates is outside of political and economic reality”.

Mark Carney has rejected calls by the Bank for International Settlements (BIS) for a swift return to normal interest rates, lambasting the lauded Swiss institution for operating “in a vacuum” and “outside political and economic reality”.


Isn’t the entire rationale for the independence of central banks supposed to be that they remain un-influenced by the pressures of politics?   Aren’t central banks granted far-reaching powers and barely-supervised freedoms precisely so they can make the hard choices and do things that are politically unpopular?

Or did you just insert your foot in your mouth, Mr. Governor?

In what must be this week’s most hilarious case of pot calling kettle black, Carney went on to accuse the BIS of operating in an ivory tower:

It’s a report that’s made in a vacuum though, the vacuum of Basel, a world where a central bank doesn’t have a mandate… a world where a central bank is not accountable to Parliament and through Parliament to the people, to achieve specific targets.

We confess to being a tad confused.  When exactly was the Bank of England accountable to the “people”?   As humorously ridiculous as it is to see Mr. Carney play populist, we do applaud him for so clearly digging trenches between the rarified ranks of the central-banking elites.

While Yellen seemed to be channeling Greenspan in cryptic, parse-worthy “Fed speak” last week – Carney did us all a favor by verbally punching the BIS directly in the nose.   Good.  Now the battle lines have been drawn.  And with your opening pawn, you’ve accidentally admitted to being a “political” entity.  That accidental admission alone would certainly seem to add gravitas to the BIS’ warning.   It’s not your day is it, Mr. Carney?

The rest of Carney’s song and dance before the Treasury Select Committee  can be summed up simply:   He too shares the ideology of responsible policy making, just not if it’s going to have any impact on our beautiful soaring markets.


In effect what the BIS would be recommending to the Bank of England would be to further extend the time over which it returned inflation to target beyond its forecast horizon, further than it ever has intended to do so, at a time when this economy has just re-attained its pre-crisis peak.

Again, Mr. Carney — we’re a tad confused.  You yourself admitted that prior to the financial collapse, there was a surplus of over-enthusiasm in asset markets, including real-estate.

Now having “just re-attained its pre-crisis peak”, shouldn’t we be concerned? If you can’t enact responsible policy when markets are at their historic highs, when exactly are you planning on being responsible?

Here’s the problem:   Carney is one of those weak, politicized economists who misses the forest for the trees.   He regards that fleeting moment at the economy’s apex – just before it’s collapse –as the last moment that the economy was “healthy”.    The causality between the market’s “pre-crisis peak” and it’s fall from grace are utterly lost on Mr. Carney.   In his mind, today’s economy which has just now re-attained it’s disastrously unstable and lofty levels is actually returning to health.    

Carney pays lip-service to responsibility but like a chronic smoker, “he’ll quit tomorrow”.  As if tomorrow will bring some some fairy-tale economy where fiscal responsibility will be as painless as fiscal irresponsibility.

Do not trouble yourself Mr. Carney.   History shows that markets are remarkably adept at resolving such economic imbalances on their own.   At which point it will be quite clear who was living in the ivory tower.