Truss Hints at Money Target for BOE if She Wins UK Leadership

The Bank of England would be given a money supply target if Liz Truss became Britain's next Prime Minister, she said.

In comments made in Friday's Channel 4 leadership debate that will burnish her credentials as the heir to Margaret Thatcher, she blamed the central bank for high inflation.

She told them to be clear. Inflation is caused by our monetary policy. Monetary supply has not been tough enough for us. That is how I would deal with that issue.

She said in an interview with The Sunday Telegraph that she would look again at the mandate of the Bank of England to make sure it was tough enough on inflation. She was worried that inflation would be worsened by excessive money supply.

Thatcher set money supply targets in the 1980's to fight inflation. Inflation targeting in the early 1990s replaced those as part of the central bank's economic models.

Since 1997, the board has been independent. Its mandate is to hit 2% inflation by the end of the year. The Bank of England expects inflation to reach double digits in October despite its recent interest rate hikes.

In an interview with The Sunday Telegraph, she said she would have a clear direction of travel on monetary policy if she were to become prime minister.

As sky-high inflation drives a cost-of-living crisis, the BoE has been dragged into the leadership debate. It came under attack for overshooting its target.

The chair of the foreign affairs select committee, Tom Tugendhat, blamed inflation on the Bank of England's bond-buying.

The lack of sound money is the cause of inflation.

Quantitative easing has been pumping up the economy and inflating a sugar high of growth in different ways, but we have lowered the cost of money. That caused the inflation.

Kemi Badenoch, a former junior Treasury minister and another contendender to succeed Boris Johnson, wondered if the missing targets might have meant that they were more complacent than they could have been.

After Tim Congdon predicted the inflation spike early on, Monetarists reclaimed some authority.

Andrew Bailey told MPs last week that he didn't subscribe to the idea that quantitative easing was to blame.

He said that he wouldn't join in the debate about who should lead the Conservative Party, but that the issue of the BOE's independence was a very serious one.