In her last speech as an MPC member at the National Institute of Economic and Social Research in London last night, Barker said she could not look back on her MPC career with satisfaction due to the Bank of England’s latent attempts to control the crisis with monetary policy alone.
She said: “Certainly I seriously underestimated the scale of the downside risks from a potential financial crisis, and that implied overrating the ability of monetary policy to offset this shock.”
Barker said the Bank should have taken a longer term view when assessing its options to deal with the crisis.
Barker also admitted that further quantitative easing might not help the economy as confidence drops in the benefits of fiscal stimulus. She said: “This could prove a concern, given that there are still some risks on the downside to the path of economic activity, including a continuing weakness in the world economy.”
Barker will leave the MPC on May 31. As yet the Bank of England has not named a successor to the role.