BoE's Martin Taylor: House Price Rises Should Not be Responsibility of FPC

It should not be the job of the Bank of England's Financial Policy Committee to stop house prices rising, according to a member.

Martin Taylor told an audience in Wolverhampton: "I don't think that it should be the FPC's job to stop house prices going up."

The FPC was created by Chancellor George Osborne to monitor and report any threats to the stability of the British economy.

"To my astonishment, the Royal Institute of Chartered Surveyors suggested that the FPC should act to cap the house price inflation at 5% per annum," said Taylor.

"Once again I find myself in two minds - pleased that people see the point of having a body like the FPC around to stop things getting out of hand but concerned that the expectations both of the scope of our role and of our ability to achieve an outcome are expanding so fast."

Any concerns that the powers and remit of the FPC were too narrow to curb a housing bubble were downplayed by Taylor.

"Many commentators have concentrated on the narrowness of the FPC's capital tools and have suggested that this may limit our effectiveness. But our powers of recommendation are very considerable and should not be overlooked," he said.

Taylor contrasted the FPC with the monetary policy committee which sets the BoE's interest rates.

He said that the FPC's job lacked defined targets imposed on the MPC whose decisions are measured in a concrete policies. These include the setting of interest rates and the scale of quantitative easing.

"At the end of every MPC meeting there is a numerical outcome - a change in interest rates, or in QE, which may be zero but is always explicit. At the FPC, no such clarity is imposed upon us," he explained.

"In the end, our actions will also be based on judgment and this judgment needs to be explained to the public and defended before a parliamentary committee."