Nigel Farage, the leader of Ukip, has used an opinion piece in London’s City A.M. newspaper to announce his support for a looser Bank of England mandate. Farage writes:
The mandate of the Bank has been focused on avoiding a repeat of the last crisis, instead of addressing the root of the problem we face today. Its negative focus on fighting inflation is put to shame by the positive objectives of the US Federal Reserve’s dual mandate that it “shall maintain long-run growth of the monetary and credit aggregates, commensurate with the economy’s long-run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.” That is the language of Ukip economics – maximum employment, growth, and a positive outlook.
The move is quite some way from the usual populism of the Ukip manifesto. On the other hand, it serves to distinguish the party from the hard money tendency within the Conservative party, and while there’s no shortage of politicians calling on the Bank to be tough on inflation, the market for expansionist policies is markedly less crowded.
One reason for the intervention is made clear by Farage; in supporting Carney’s more expansionary tendencies, he is coming out against the European Central Bank:
Where is the worst major league central bank mandate? Europe and the European Central Bank, of course. It makes a god out of fighting inflation, whatever the human cost. In the arid world of central banking, it is time for the UK to turn away from Europe.
Farage’s analysis of the ECB is not wrong. It is widely acknowledged to have a far greater fear of inflation than is healthy, largely because of the over-powerful influence Germany has on the Bank’s policy. The German fear of inflation is legendary, and the single currency means that the policy Germany wants is the policy the eurozone gets.
But the Bank of England and the ECB are like apples and oranges in more ways than just their attitude to inflation. If Farage really thinks he can learn what is best for England by doing the opposite of what the ECB does, he’ll get lucky a couple of times; but in the end, that strategy will fail.