“It wouldn’t guarantee a V-shaped recovery but it would certainly increase the probability of one. I do suspect there are some people around the Treasury that are probably thinking about things like this.”
NGDP is the value of all goods and services produced in the economy, unadjusted for inflation. Early advocates of targeting it included James Meade, the Nobel Prize-winning British economist, in 1978. The idea was mooted again in a speech by Mark Carney shortly before his appointment as the Bank’s governor in 2013, only to be rejected by the Treasury.
Giles Wilkes, a former Downing Street economic adviser, dismissed the idea that the Chancellor would be moving the goalposts by shifting the Bank’s focus away from its 2pc inflation target.
He said: “Winning’s all that matters. People said the same about going off the gold standard in the Thirties but it was the necessary condition to stop strangling the economy. It looked like it was cheating but going off the [European Exchange Rate Mechanism] peg in 1992 boosted the economy instantly by raising people’s expectations of the future pathway.
“It would be radical but everybody’s in a better position if the economy’s growing more, and those low interest rates are not a good sign that things are prosperous.”