George Osborne denies pact with Bank of England

George Osborne, the Chancellor of Exchequer, has today rubbished claims that the UK government has made some form of informal pact with the Bank of England with regards to the level of UK base rates. This comes only 24 hours after Mervyn King, the governor of the Bank of England, suggested that UK base rates could remain at 0.5% for some time to come. So is there some kind of informal agreement?

While there is speculation that the Bank of England is looking to "assist" the UK government it would be very foolish of the UK authorities to put in place some form of formal or informal pact with the Bank of England. This would completely ruin the reputation of the Bank of England, which has operated independently of the UK government for some time, and would damage the UK's standing on the international arena.

It would appear that simply because both parties are looking to move in the same direction, i.e. support the UK economy, there is a suspicion that they're working together. The truth is that Mervyn King is a very independent financier and, as shown with the last government, would not appreciate interference on his "patch".