The new chief economist of the Bank of England supports restrictions on quantitative easing

Bank of England update

The Bank of England appointed a new chief economist, who is known for his orthodox thinking on monetary policy and interest rates, and supports restrictions on quantitative easing to support the economy.

Huw Pill developed his views during his many years as an official at the European Central Bank and Goldman Sachs. Former colleagues called him a “hawk” in monetary policy.

That dateIncluding seats on a nine-member Monetary Policy Committee will mark a change in the Bank of England, which has become accustomed to the unconventional thinking of its predecessor Andy Haldane.

Pill will begin his term on September 6 and move from Harvard Business School, where he has been a senior lecturer since 2018. The role of chief economist is a permanent position, while the MPC’s seat is three years, but it can be re-elected.

After a short job at the Bank of England, the formation stage of his career was spent at the European Central Bank, where he rose to the highest possible level of officials in non-eurozone countries, and worked with the then chief economist Otmar Ising (Otmar Issing) is close, in the years before the global financial crisis.

Ising, the current director of the Institute of Financial Research Center, formulated the European Central Bank’s “two-pillar” interest rate setting method. When determining the potential trend of inflation, it will pay attention to the total amount of money. He was pleased with Peel’s appointment on Wednesday.

“Pill is an outstanding economist in my team of outstanding experts from the European Central Bank. He combines top-level research with a broad and in-depth understanding of all aspects of monetary policy,” he said.

Other former colleagues who asked not to be named described Pill as “very smart” and he was more like a central banker than a Goldman Sachs banker.

in a Recent bookPublished by the National Institute of Economics and Social Studies in the United Kingdom, Peel wrote a chapter calling for restrictions on central bank governors’ use of unconventional monetary policies, echoing some Recent criticism The Bank of England stated in its parliamentary report that it has become obsessed with quantitative easing.

In the chapter written before the coronavirus pandemic, Peel stated that central banks should focus on the task of controlling inflation and be skeptical of new policy ideas, such as whether the Fed is willing to after a period of low inflation. Keep interest rates low until the average inflation rate reaches the prescribed 2% target over time.

Instead, he advocates policy flexibility, allowing inflation to deviate from the target if it is necessary to deal with unsustainable pressures in the economy, such as the pressures that were evident before the 2008-09 global financial crisis.

But he called for restrictions on quantitative easing so that the government can never count on the central bank to finance its deficits, thereby undermining price stability to “complement” the additional flexibility of monetary policy in the short term.

He pointed out that the central bank is under “understandable and unavoidable” pressure to finance government deficits, which may lead to the long-term cost of inflation. He said: “Defensible limits [on unconventional policies such as QE] Because a new, post-crisis world is preferable to no restrictions. “

Andrew Bailey, Governor of the Bank of England, said: “Huw will make a significant contribution to monetary policy and the broader work of the bank. I look forward to working with him very much.”

Peel said: “During a time when monetary policy and the central bank are still full of challenges, it is a great honor to rejoin the bank and have the opportunity to make a broader contribution to the work of the Monetary Policy Committee and the bank.”

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