Broadbent Suggests King Letter Angst Probably Won’t Be Repeated

Bank of England policy maker Ben Broadbent said the letter sent to Governor Mervyn King last year by officials protesting at being kept uninformed on a policy initiative arose in a situation that’s unlikely to be repeated.

“I don’t imagine this will crop up again,” Broadbent said in an interview today in London. “I don’t think it will.”

Broadbent, David Miles, Adam Posen and Martin Weale wrote to King in June after finding out that he and key aides were privately designing the Funding for Lending Scheme, two people with knowledge of the matter said in December. The episode highlights the management challenge Bank of Canada Governor Mark Carney will inherit in coordinating varying areas of policy making and different committees when he succeeds King in July.

“It is inevitable that once you get to zero interest rates, that the boundaries, formerly distinct, between monetary policy and prudential, and liquidity, and fiscal policy become fuzzier,” Broadbent said. “It would be hard to have gone through the last three to four years without these things cropping up.”

Posen, speaking to lawmakers in January, referred to the FLS episode as a “mess.” That was partly because “there were all these incredible machinations going on between Treasury and the bank executive to get this through,” he said.

Coordination ‘Challenges’

“Inevitably, there has to be coordination across different parts of the bank and different institutions entirely, and that presents its own challenges,” Broadbent said today.

Broadbent suggested that the matter is closed and that he now knows all he needs to in his role as a member of the Monetary Policy Committee. He said he plans to keep fully informed on whatever goes on across the bank’s operations when it’s relevant to monetary policy.

“We were making a particular point on a particular thing,” Broadbent said. “The timing was inevitably very difficult. Despite the fact that I’m on the MPC, I’m nowhere near all these new policy areas, and I feel fully informed of everything, there are no constraints at all”

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