Governor berates Balls over 'rate rise' speech

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The Independent Online

Mervyn King, the Governor of the Bank of England, took a barely concealed swipe at a senior Treasury official for giving a keynote speech on monetary policy just 48 hours before the Bank set interest rates. He said people in "sensitive positions" should stay silent on monetary policy decisions during a week when rates might change.

Mr King was asked about a speech Mr Balls gave on 3 February when he said there was "now a consensus" across the country for a "pre-emptive" approach to monetary policy.

The Treasury drew journalists' attention to the speech, which was heavily reported in the following day's newspapers as the Monetary Policy Committee began its deliberations.

Analysts said the comments were a green light from the Treasury for an early rate rise.

Mr King said he too had given a speech that week but had made clear he would not mention monetary policy. "I told them that I and the whole committee was in purdah that week," he said yesterday. "I was clear I was not going to speak on monetary policy during that week and maybe for people in sensitive positions that's not a bad practice."

However, he added he had never received any "advice, pressure or wish" from the Treasury on interest rates since the Bank was made independent in 1997. "You could not possibly ask for more than that," he said.

The Treasury said Mr Balls' speech had been on the monetary policy framework, for which the Treasury was responsible, rather than immediate rate decisions. A spokesman said Mr Balls and the Chancellor had repeatedly said they supported pre-emptive policy decisions.

Oliver Letwin, the Conservative Treasury spokesman, said: "The logic of the independence of the Bank demands that Treasury ministers and their advisers do not apply any pressure on the Bank in relation to interest rates."