The Bank of England should not print money to finance a green revolution, radical social change or any other political schemes, Mark Carney has warned.
In a review of his tenure at the top of the Bank, which comes to an end when Andrew Bailey takes over in March, Mr Carney said the institution should not succumb to pressure to tackle every challenge facing the country.
The outgoing Governor has himself been a champion of action to tackle climate change. He has sought to prepare the financial system to fund green technologies, and warned of the risks facing those businesses that fail to take the environment seriously.
Mr Carney will become the UN’s special envoy on climate change once he leaves Threadneedle Street.
But that does not mean the Bank should fund the green agenda with quantitative easing (QE), he said, referring to the policy of printing money to buy bonds which was used to boost the economy after the financial crisis.
Instead, the central bank should stick to its main job of setting interest rates to keep inflation at or around 2pc.
Mr Carney said: “There have… been calls for asset purchases to address policy goals not directly related to monetary policy, such as people’s QE or MMT [‘modern monetary theory’] – which essentially equate to fiscal policy – and green QE to support the transition to a net zero carbon world by supporting green finance.
“In my view, these should be resisted. While carefully circumscribed independence is highly effective in delivering price and financial stability, it cannot deliver lasting prosperity and it cannot address broader societal challenges.
“Calls for the Bank to solve broader challenges ignore the Bank’s carefully defined objectives. And they often confuse independence with omnipotence.”