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--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
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.
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 Bank economists' work found that "The number of households who have
lost out in welfare terms from looser monetary policy is only 12%," Haldane
--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.
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