Which mistake will central bankers choose to make next?

The heads of the Bank of England and the US Federal Reserve have choices – but none of them are good choices, says Merryn Somerset Webb.

Man playing the cup game
There are no good choices here
(Image credit: © Getty Images)

I used to think the worst job in the world would be chancellor of the exchequer. I’ve changed my mind. At least as chancellor you pretty much always have the opportunity to do things you know will improve the nation’s financial security, or even make people’s lives better. That chancellors often don’t use those opportunities very well doesn’t mean they aren’t available. That is not the case if you are a modern central banker.

The heads of the Bank of England and the Federal Reserve do get choices. It is just that none of them are good choices. Such leeway as they have consists entirely of choosing which mistake to make when it comes to monetary policy. They are already so far behind the inflation curve that there is no easy way out (I am generously leaving aside that they are lying in beds of their own making). They can either raise interest rates very sharply to control inflation, and thus create a recession – or they can keep rates below inflation and give in to prices rising at rates way above their 2% inflation targets (we talk in this week's magazine about how we all need to learn to live with inflation, and why there’ll be more of it for longer than anyone thinks).

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.