But in the end, they’re pretty helpless when it comes to significantly turning the tide of battle.
You don’t really have to look very far for an example of this. The BOE is what all other central banks wish they didn’t become and they are in the spotlight again today.
Politicians insist that they are “doing their job” when it comes to fighting inflation. However, the irony is that they have next to no influence in the debate, especially when the lack of tax inaction leads to things like this. It’s not something the BOE can control. And neither are supply chain bottlenecks, soaring energy prices, and geopolitical issues involving sanctions.
It’s just the illusion they’re trying to sell, but unfortunately they might very well have to admit that it’s all been for naught if the economy starts to crack under the pressure of everything else. And today’s UK PMI data is sure to pose such a dilemma for the BOE.
It’s easy to point fingers and scrutinize the BOE for such “mismanagement”, but the fact is that central banks have a mandate to follow and the least talked about point is how politicized each institution has become. these days. No decision maker wants to cut ties and none of them is willing to say what needs to be said.
However, the central bank’s toolbox is not the right one to deal with the current problem of inflation. Governments are better equipped and should take the lead. However, no decision maker came to underline it in a significant way.
I think we can all understand that if central banks don’t act, the problem could be worse. But please spare us the illusion. It is sad that integrity and central banking are two things that could forever be mutually exclusive.