The Bank of England’s Imperfect Intervention
Following a newly installed government’s announcement of large, unfunded fiscal stimulus measures, the Bank of England had no choice but to intervene to stabilize financial markets. But in doing so, the BOE made errors and took shortcuts that should be avoided in the interest of preserving its policy credibility.
LONDON – Amid the political turmoil of outgoing British Prime Minister Liz Truss’s short-lived government, the Bank of England has found itself in the fiscal-financial crossfire. Whatever government comes next, it is vital that the BOE learns the right lessons.