theguardian.com

Summary : As a key supporter of the foreign secretary, Liz Truss, the current frontrunner to be the next Tory leader and prime minister, Kwarteng’s comments suggest the Bank’s independent mandate to keep inflation at 2% may be re-examined if she takes over at No 10.

Kwarteng told Sky News : “The job of the Bank was to deal with inflation. Kwarteng also said the Bank should have acted quicker to increase interest rates in an effort to control inflation : “I think there is an argument to suggest the rate should have probably gone up slightly sooner.”

When asked if the Bank would keep its independence, he said “absolutely” but also described potential interventions.

“We need to look again at what the mandate is and how best they can actually fulfil that mandate,” he said, adding: “You’ve got to look at how the Bank is organised and what the targets are.”

However the Bank’s governor, Andrew Bailey, defended its performance, insisting it hadn’t acted too slowly to raise interest rates because it was important to defend the economy in the wake of Covid.

He told Radio 4’s Today programme: “If you go back two years … given the situation we were facing at that point in the context of Covid, in the context of the labour market, the idea that at that point we would have tightened monetary policy, you know I don’t remember there were many people saying that.”

Kwarteng was speaking in the wake of Truss’s appearance on a Conservative leadership debate against Rishi Sunak on Sky News on Wednesday.

Business secretary Kwasi Kwarteng has attacked the the Bank of England’s control of inflation saying “something had clearly gone wrong” at the institution as prices are predicted to rise by 13% and the UK is forecast to suffer an economic downturn lasting more than a year.As a key supporter of the foreign secretary, Liz Truss, the current frontrunner to be the next Tory leader and prime minister, Kwarteng’s comments suggest the Bank’s independent mandate to keep inflation at 2% may be re-examined if she takes over at No 10.Kwarteng told Sky News : “The job of the Bank was to deal with inflation. They’ve got a 2% inflation target, that’s actually their mandate. And now inflation is getting double digits. So clearly, something’s gone wrong.”He added: “I think there is an issue about how the Bank is operating because clearly if I say to you 2% is your target, and you say to me, ‘Well, actually it’s going to hit 13%,’ I would quite rightly say something’s gone wrong. We’ve got to look at how you’re performing.”Kwarteng also said the Bank should have acted quicker to increase interest rates in an effort to control inflation: “I think there is an argument to suggest the rate should have probably gone up slightly sooner.”

When asked if the Bank would keep its independence, he said “absolutely” but also described potential interventions.

“We need to look again at what the mandate is and how best they can actually fulfil that mandate,” he said, adding: “You’ve got to look at how the Bank is organised and what the targets are.”However the Bank’s governor, Andrew Bailey, defended its performance, insisting it hadn’t acted too slowly to raise interest rates because it was important to defend the economy in the wake of Covid.He told Radio 4’s Today programme: “If you go back two years … given the situation we were facing at that point in the context of Covid, in the context of the labour market, the idea that at that point we would have tightened monetary policy, you know I don’t remember there were many people saying that.”Kwarteng was speaking in the wake of Truss’s appearance on a Conservative leadership debate against Rishi Sunak on Sky News on Wednesday. Sunak was the clear winner among the audience of Conservative members when they were asked for a show of hands.Kwarteng conceded: “He was very fluent, he was very slick. He performed at the end. And I think he did make an impact.”But he said that Sunak’s was “the wrong approach”, saying that Truss’s £30bn plan for tax cuts was the answer.“Interest rates went up yesterday by the largest amount since 1995. That’s 27 years ago. So on top of that, to put up taxes on people, I think is perverse. It’s not a way to deal with a recession,” Kwarteng said.Robert Hayward, a Conservative peer and elections analyst, said Sunak’s debate performance caused “a stop in terms of the momentum in one direction” of the campaign that had been going in Truss’s favour.“There’s no question in my mind and the vote of the audience, it was the first time that he had clearly led in a debate,” he told Sky News.He added: “Liz has had the best of the last few days, no question about it, with the series of endorsements from different major personalities. I think what happened last night was there was a stop in terms of the momentum in one direction.“It won’t necessarily have reversed it, but there will be this morning a different sense of messaging that is around.”