central bankers in the dock
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Andrew Bailey has political concerns. Since the beginning of the summer, the debonair-looking Governor of the Bank of England (BoE) has been the target of criticism from the highest levels of the British government. Kwasi Kwarteng, the minister for business and industry, sums up the attacks in one sentence: “When your inflation target is 2% and you predict you will soon be at 13.3% [prévision officielle de la BoE], there is something wrong. »
The main central bankers of the planet were to meet, from Thursday August 25, for their annual three-day symposium organized in Jackson Hole, in Wyoming (western United States). While their reunion is still very important, it’s been a long time since they’ve been reviled so much. What applies to the Bank of England also applies to the US Federal Reserve (Fed) and the European Central Bank (ECB). All aim to keep inflation around 2%. However, it is clear that this is not currently the case: in July, it stood at 8.5% in the United States, 8.9% in the euro zone and 10.1% in the United Kingdom. United.
It’s been more than a year since Lawrence Summers, the former US Treasury Secretary (1999-2001), stormed against the Fed. “We have a generation of “woke” central bankers who define themselves by their social commitment, their concern for the environment or financial excesses, but all their experience comes from a period when inflation was under the objective [de 2 %] »he was annoyed, in October 2021. According to him, these “masters of the world” have ended up forgetting their real reason for being, namely to ensure price stability.
Mervyn King, the former governor of the BoE (2003-2013), makes the same diagnosis: “The central bankers all made the same mistake. During the pandemic [de Covid-19]they thought they had to show that they were present, that they were doing something », he explained in May to Sky News. According to him, by lowering their interest rates too sharply during the confinements, and by injecting liquidity with all their might, they have committed a serious “intellectual error”. “They decided to print money just when we were producing less. Then there was too much money in circulation and not enough goods, resulting in inflation. »
Two gigantic shocks
In the world of economists, however, these attacks remain in the minority. “It’s a little easy to criticize afterwards, says Laurent Bilke, who founded Alternative Macro Signals, a company that has developed indices to detect inflation trends. Twelve or eighteen months ago, the vast majority of economists, but also of governments, thought that inflation would be temporary. »
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