Very few people now write formal letters to each other. But today’s delicately choreographed exchanges (“Dear Chancellor, Dear Mark”) signal the next stage in opening out monetary policy. For those interested in alternative ways of making policy, the changes in UK monetary policy illustrate how far it is possible to move issues from high politics to deep technocracy. Once, not too long ago, interest rates were regarded as high politics by the Treasury and No.10.  Nigel Lawson’s mammoth tome, “The View from No.11”, even entitles a chapter “Politics and Interest Rates, 1986” and describes how he made a decision on interest rates as the economy deteriorated that year. He was returning from the Conservative Party Conference in Bournemouth, where he had ‘dealt with the tricky issues of interest rates and the pound by ignoring them’. He wrote: “As soon as I got back to London…I called a markets meeting with Robin [Leigh-Pemberton, then Governor] and the customary cast and decided without too much difficulty to raise interest rates by one per cent….Margaret [Thatcher, Prime Minister] was sufficiently relieved I had not gone for a two-point rise to agree to it with relatively little resistance. For myself, I disliked going up by more […]

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