MARK Carney, governor of the Bank of England, grabbed the headlines this week with a speech that suggested British interest rates were unlikely to rise any time soon. (A bit of a victory for Andy Haldane, the Bank's chief economist, who has even suggested the next move in rates might be down.) But it is also worth reading a very thoughtful speech from a newish monetary policy committee member, Gertjan Vlieghe (formerly at the Brevan Howard hedge fund group).
Mr Vlieghe examines the case that real interest rates may remain low for a considerable period (readers may recall that Larry Summers has made a similar argument under the "secular stagnation" hypothesis). The BofE man cites three factors; debt, demography and the distribution of income. It is hard for this writer not to cheer when he reads that
Debt matters. That was a controversial statement a decade ago. It is far less controversial now. Post-crisis, we now have ample evidence that households and firms with higher debt levels reduce spending more...Continue reading
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