Potential BOE Contender Lyons Urges Review of Inflation Target

(Bloomberg) -- Gerard Lyons, a potential contender to be the next Bank of England governor, has called on the government to review the institution’s 2% inflation target.

The economist, a former adviser to Boris Johnson and a prominent advocate of Brexit, also said in an opinion column for the Financial Times that the U.K. has room to borrow more to support the economy, and urged “realism” as the nation approaches its departure from the European Union.

“Economic success requires consistency between monetary and fiscal policy. It goes without saying that the Bank of England must ensure monetary and financial stability. But here, as elsewhere, the remit of the central bank needs revisiting. For instance, is a 2 percent inflation target this appropriate and what lessons can we learn from elsewhere?”
-- Gerard Lyons

The Times reported last week that Lyons was interviewed for the role of BOE governor as the British government seeks a successor to Mark Carney, who will step down in January. While the decision is made by the U.K. Chancellor, Johnson could have significant influence over the appointment if he becomes prime minister this week as expected.

Former Reserve Bank of India governor Raghuram Rajan, once considered a frontrunner, has said he didn’t apply for the BOE, indicating that the political challenges posed by Brexit were the reason.

The BOE wouldn’t be alone in undertaking a review of its inflation target. The U.S. Federal Reserve is already examining its approach to hitting its goal for consumer-price growth, and European Central Bank staff have started studying their interpretation of the institution’s mandate.

Lyons also said in the FT article that capital requirements on commercial banks should be eased and steps taken to boost bank lending. Bookmaker Betway says he’s now the frontrunner among betters on the governorship.

To contact the reporter on this story: Paul Gordon in Frankfurt at pgordon6@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Jana Randow

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