April 10, 2018 / 12:19 PM / a year ago

Personalized scorecards could show public how Bank of England policy works: Haldane

LONDON (Reuters) - The Bank of England could send members of the public personalized scorecards to show how changes to interest rates and other policies have affected them, the central bank’s chief economist Andy Haldane said on Tuesday.

FILE PHOTO: A statue is silhouetted against the Bank of England in the City of London, Britain, December 12, 2017. REUTERS/Clodagh Kilcoyne/File Photo

Haldane, who has made headlines before by tackling radical subjects like the abolition of physical cash, said the BoE’s actions since the 2007-09 financial crisis had benefited British households.

The BoE and other major central banks slashed interest rates and pumped vast quantities of new money into the financial system in response to the global crisis.

Many people say lower interest rates have left them worse off, but Haldane said the evidence showed very few households lost out as a result of the BoE’s decisions.

Savers in particular have complained that low rates have hammered returns on their money, and the BoE’s own research shows older people are likeliest to say they have lost out from the central bank’s policies.

In 2016 British Prime Minister Theresa May said low rates had bad side effects, a comment that prompted Governor Mark Carney to reassert the BoE’s operational independence from the government.

The view that ultra-loose monetary policy has done more harm than good also crops up elsewhere. Before becoming U.S. president, Donald Trump frequently lambasted the Federal Reserve’s low interest rates.

Haldane said evidence suggested the average household gained around 1,500 pounds ($2,125) each year from the BoE’s policies.

“My view is that there is a strong case for making, on a periodic basis, comprehensive and transparent assessments of the distributional impact of monetary policy,” Haldane said in a speech for delivery at the University of Melbourne, Australia.

To aid public understanding, Haldane suggested the BoE could produce a personalized scorecard to show how its policy was affecting individuals.

“Some scorecard-like device could, at times of significant change in the monetary policy stance, help explain, in simple terms, the personal as well as societal benefits monetary policy confers,” Haldane said.

“This should help make monetary policy relevant to people’s everyday lives.”

Interest rates were cut from more than 5 percent to a then-record low 0.5 percent between 2008 and 2009. A decade later they remain at that level.

Haldane said the BoE’s actions since 2007 had helped people across the full range of income and wealth, age and region, although different groups of people had benefited in different ways - for instance through rising income or wealth, or through increased job security.

Looking at income and wealth together, Haldane said the evidence showed only 4 percent of households were made 500 pounds or more worse off.

An sample scorecard produced by Haldane showed how monetary policy had affected income from interest and labor income; financial, pension and housing wealth; as well as the probability of unemployment.

Economists polled by Reuters think it is very likely the BoE will hike rates to a new post-financial crisis high of 0.75 percent in May.

Haldane did not address the near-term outlook for monetary policy in his speech.

($1 = 0.7057 pounds)

Reporting by Andy Bruce; Editing by William Schomberg/Mark Heinrich

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