THE IMPLICATION OF BANK OF ENGLAND FASTER INTEREST RATE INCREASES

To:     The Right Honourable Bank of England Governor Mr. Mark Carney

From: Athinarayanan Sanjeevraja

Date: November 5, 2018

RE:     The implication of Bank of England faster interest rate increases.

Suggestion:

Mr. Governor let me start by paying my respects to you and through you to. I just heard from Bank of England in the event of hard BREXIT, it would be less likely to continue tightening and even ease monetary policy to support UK economic growth and in the event of soft BREXIT it would be more likely to continue tightening and aggravate monetary policy to support UK economic growth that would be compatible with Bank of England alleviating in the wake of the UK BREXIT vote. In my opinion it is diametrically the wrong policy because hard BREXIT more likely to add to inflationary pressure, sterling falls and it generates economic downturn. IMHO, we should not ease monetary policy in the situation of a hard BREXIT. We can ease monetary policy in the situation of soft BREXIT but not the hard BREXIT. Hard BREXIT add to more inflationary pressure, sterling falls and it generates UK economic growth downturn. Hard BREXIT make it happen by the Hon. Theresa May government. Let Hon. Theresa May bear full responsibility. It is my humble request to the Bank of England Governor not to make any contributions to the leave vote or remain vote.  The MPC should be reminded that their legal mandate makes price stability which should be their exclusive first priority. The price stability objective should be meeting the MPC suppose to support the UK economic growth and employment. There are provisions in the Bank of England Act for the UK government to direct monetary policy in extreme economic situations. If the Bank of England eased or tightened monetary policy in response to the leave or remains vote, monetary policy may builds of moral hazard. In the event of crisis, expectations of the alleviating action become so large the Bank of England cannot meet those expectations despite allowing inflation exceed. As a result there is an acute crisis.

Hon. Governor i knew that MPC is too concerned to support the UK economic growth and the UK housing market and it is key driver for the UK’s growth. I would like to recommend MPC should be reminded that their legal mandate makes price stability which should be their exclusive first priority. Sometimes it is significantly challenged when central banks deviate from their legal mandate. The bad experience of Bank of England deviating from their legal mandate should be a lesson to learn. I trust that suggestions made therein are of helpful and relevance to the Bank of England interest rate increases. Should you have any questions regarding the content of this letter please contact me by mail?    

Thank you very much for your attention.

Respectfully yours

Athinarayanan Sanjeevraja.

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Athinarayanan Advisory Authority.