Bank of England Governor Mark Carney has unveiled his vision for a reformed banking model in which the UK’s central bank would have more power.
A “transformative” overhaul will see significant changes to senior personnel at the Bank.
He said the move was needed to prevent future economic crises, and singled out the last Labour government’s inflation target for particular criticism, saying that it had created a narrow view of central banks as guardians of inflation.
At his Mais Lecture at the Cass Business School in London, Carney said: “This focus initially made sense, since one of the greatest challenges for macroeconomic policy in the late 1970s and 1980s was the fight against inflation.
“However, with time, a healthy focus became a dangerous distraction.”
He added: “In my view, while there were enormous innovations of enduring value during this period, the reductionist vision of a central bank’s role that was adopted around the world was fatally flawed.”