A group of MPs have launched an inquiry into the risks of politicians putting “undue pressure” on the Bank of England following Theresa May's criticism of the side effects of the central bank’s monetary policy decisions.
The Treasury Select Committee investigation will also examine the impact of the Bank of England’s record low interest rates and quantitative easing policies since the financial crisis in 2008.
The Prime Minister suggested that low interest rates were increasing inequality across the country, in her keynote Conservative conference speech in October.
Mark Carney, Governor of the Bank of England, argued that the monetary policy pursued by the Bank in recent years has had a positive impact that is “without parallel”, despite the Prime Minister using her speech to claim it had led to “bad side effects”.
Chairman Andrew Tyrie said in a statement announcing the inquiry: "Interest rates are stuck near zero, the Bank of England has used increasingly unconventional forms of quantitative easing, and inflation has been below the two per cent target for three years."
The inquiry will examine the "unintended consequences" of monetary policy on house prices, savings and pensions, Mr Tyrie added.
The Committee's role is to scrutinise economic policy, both fiscal and monetary, helping to hold government and the Bank of England to account.
Jordan Rochester, foreign exchange strategist at Nomura, said: "This doesn't necessarily mean that a BoE mandate change is on the way anytime soon but it does tie in with the theme Theresa May outlined in her Conservative conference speech."
The Bank of England slashed interest rates to record lows and embarked on a massive bond-buying program to counter the deep recession eight years ago.
It further expanded its stimulus by launching a major an extended programme of £60bn worth of quantitative easing in August in a bid to avert the threat of the UK sliding back into recession in the wake of the shock Brexit vote on 23 June.
Additional reporting by Reuters
