Britain Should Ease Up On The Brakes

When Chancellor of the Exchequer Gordon Brown handed control of interest rates to the Bank of England in 1997, his stated aim was to free decisions on rates from politics. A little more than two years later, the experiment looks like a mixed success at best. The bank's monetary policy committee pushed up rates to 7.5% in June, 1998, then ratcheted them down to 5% a year later. In its latest twist, the BOE surprised the markets by raising rates a quarter point on Sept. 8 just months after Britain dodged a recession. Britain's newly free central bank needs to settle down. It should also do some serious research about how far along Britain has evolved into a New Economy and what that means for monetary policy.

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