MNI: BOE Haldane Says Majority Gained From Post Crisis Policy

--Haldane Makes Case For "Monetary Policy Scorecards" For Cohorts

By David Robinson

     LONDON (MNI) - The Bank of England's extensive loosening of monetary policy

in the wake of the global financial crisis had benefitted most groups across the

social spectrum, Chief Economist Andy Haldane said Tuesday, adding that he

didn't believe it markedly exacerbated differences between households.

     Haldane presented Bank research on household balance sheets which suggested

that the loosening "did not have significant adverse distributional

consequences." 

     Bank economists have been looking in depth at the impact of its

quantitative easing (QE) and ultra-low interest rate policy, and while some

negative effects have shown up these have been at the margins.

     --COMMUNICATION PROBLEM

     Haldane noted how the Bank has struggled to get its message across on the

benefits of QE and ultra-low interest rates when it had highlighted its effects

on overall GDP and inflation. He argued that it would be more effective to show

the impact of the policy on different cohorts, presenting "monetary policy

scorecards" for separate groups.

     "Messages often land most effectively when they are personalised. Monetary

policy has an important personalised impact on most people's live," he said.

     The MPC faces a political battle to ensure that it can keep hold of its

full range of policy tools, with critics on both the left and right of the

political spectrum having argued that QE was a benefit for the rich rather than

the have-nots.

     The Bank economists' work found that "The number of households who have

lost out in welfare terms from looser monetary policy is only 12%," Haldane

said.

--DISTRIBUTION OF GAINS

     Importantly the gains were not concentrated at the top end of the income

and wealth spectrum.

     "These gains have been shared right across the distribution of income and

wealth, age and region, though the precise scale and nature of these benefits

does differ across cohorts. Very few households across the UK are likely to have

been net losers in financial terms from the MPC's monetary loosening, once all

of its effects are take into account," Haldane said.

     One side effect of QE with its bulk purchases of gilts was to hit pension

annuities, which are based on gilt yields, lowering pensioner incomes.

     Haldane, however, said that taken in the round pensioners were big gainers,

not losers, from the policy, which drove up house and equity prices.

     "In money terms, the largest beneficiaries have been older age groups, the

value of whose pensions and houses have been boosted by the policy-induced rise

in asset prices. Looking at the oldest age group, this boost to wealth has

exceeded their income losses by a factor of around 10," he said.

     Haldane was delivering the Finch Lecture at the University of Melbourne.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$B$$$,M$E$$$,MT$$$$,M$$BE$]