(Bloomberg) — Tackling future recessions with helicopter money risks central bank independence and should be a final resort, Bank of England policy maker Gertjan Vlieghe warned.
Introducing such a policy of distributing money to the public becomes “quite a radical policy option” if the central bank also does not pay interest on reserves, he said at an event at Bloomberg’s London offices Monday.
“By mechanically keeping rates stuck at zero, the reserve expansion effectively suspends for a period both the instrument and the target of the central bank. Therefore, it effectively suspends for a period central bank operational independence,” Vlieghe said. “Central bank operational independence has served us extremely well in keeping inflation low and inflation expectations anchored.”
Vlieghe said “we should try everything else first.”
He also said that interest rates all over the world are likely to remain low for years to come.
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