Yesterday's further instalment came courtesy of the magazine of the Bow Group, Crossbow, not hitherto noted as a vehicle for important announcements of monetary policy. Mr Clarke said it was partly as a deliberate attempt to conceal his opinions on central bank independence that he had said he had an open mind on the subject, and the tenor of his remarks then suggested that he does not favour placing 'key decisions in interest rates . . . utterly beyond the reach of elected politicians'.
However, Mr Clarke declared himself against political shenanigans, and his announcement that the Treasury will relax its controls over the Bank is welcome. This means that it will not even see a draft of the Bank's quarterly report on inflation trends. At present, it sends comments to the Bank, which can take them on board or not. The reference to the removal of other constraints probably means allowing the Bank more operational leeway over issues like sales of gilts.
These are small but important steps. Both Eddie George, the Governor, and Rupert Pennant- Rea, his deputy, are strong characters with a firm belief in the importance of low inflation and sound public finance. Mr Pennant-Rea's call on Monday for a true inflation target of 1 to 2.5 per cent was further testament to that. If they push at the door the Government is leaving ajar, they may surprise themselves - and the bond market - with the influence they ultimately wield.Reuse content