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MNI BRIEF: 'Fiscal Dominance Concerns' Not BOE Policy Driver

(MNI) London
(MNI) London

MPC member Silvana Tenreyro says BOE policy not set by fiscal dominance concerns.

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Silvana Tenreyro, Bank of England Monetary Policy Committee member, rejected the suggestion that "fiscal dominance," worrying about driving up government borrowing costs, lay behind policymakers' reluctance to tighten policy despite inflation surging. Speaking at King's College Business School event Tenreyro said that both fiscal and monetary policy were responding to the same shock when Covid hit and they moved in same direction which gave the impression blurred lines.

She said that she did not expect quantitative tightening, with the Bank set to come up with a framework for gilt sales in August, would have much economic impact as QE had largely worked by tackling liquidity shortages, which are not present now.

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Silvana Tenreyro, Bank of England Monetary Policy Committee member, rejected the suggestion that "fiscal dominance," worrying about driving up government borrowing costs, lay behind policymakers' reluctance to tighten policy despite inflation surging. Speaking at King's College Business School event Tenreyro said that both fiscal and monetary policy were responding to the same shock when Covid hit and they moved in same direction which gave the impression blurred lines.

She said that she did not expect quantitative tightening, with the Bank set to come up with a framework for gilt sales in August, would have much economic impact as QE had largely worked by tackling liquidity shortages, which are not present now.