Letter: BoE must end asset purchases to avoid stoking inflation

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We are a group of economists observing the Bank of England’s Monetary Policy Committee and we are writing to express our concern at the rapid growth in the quantity of money.

We believe that inflation above target is to be expected in 2022 and possibly 2023. In our view, the Bank of England will be responsible for this setback, as it took the steps that pushed money growth. at its current excessive level (notice, FT.com, April 1).

Bank of England researchers deserve praise for preparing a monetary aggregate (the so-called “M4x”) that measures money held by genuine non-banks and removes the often distorting influence of quasi-banks or “intermediaries of other financial companies”. However, key decision makers in the MPC seem to pay insufficient attention to their excellent data. Between February and February, M4x grew by 15.2%, the highest figure since the launch of the M4x series in 1998.

Other monetary series have been established on a regular basis since 1963. One of these series shows that the increase in the monetary balances of enterprises during the year ending in February was not less than 29.2 per year. hundred. Such high figures were only recorded before in the inflationary 1970s and 1980s. The last time the annual growth rate of corporate money reached 30 percent was in late 1986, before the boom years of 1987 and 1988.

We fear that inflation above 5% is likely at some point in the next few years. We believe that the MPC’s decision in November 2020 to embark on yet another round of quantitative easing, to the tune of £ 150 billion, has been particularly responsible for the current excessive money growth. The November decision was misguided and unnecessary and should be reconsidered. The BoE should now end its asset purchases as soon as possible.

Professor Tim Congdon
President, Institute for International Monetary Research, University of Buckingham

Julian Jessop
IEA Fellow in Economics

Andrew Lilico
Economy of Europe

Professor Kent Matthews
Cardiff School of Business

Professor Trevor Williams
St Mary’s University

Professor Philip Booth
Director, Vinson Center, University of Buckingham

Juan Castaneda
Institute for International Monetary Research, University of Buckingham

John greenwood
Chief Economist, Invesco

Professor Patrick Minford
Cardiff School of Business

Peter Warburton
Economic perspective

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