The economy is going two ways

The economy is going two ways, simultaneously.

Manufacturing is in recession. Manufacturing jobs are being lost. Industrial investment is being slashed. Companies would like lower interest rates to help produce a much lower pound/euro rate.

Yet other parts of the economy are growing. Especially "services" - from banks to shops, from public sector to restaurants. We consumers are spending, buoyed by high employment and historically low interest rates.

This dichotomy shows how difficult it is to steer the economy. Should interest rates be lowered, to help industry, or raised, to encourage us to save not spend?

These question are tough - whether interest rates are set by the Bank of England, for the whole of the UK or whether we were to introduce separate rates for different regions. And they remain as difficult when interest rates are set by the European Bank for the whole euro-zone.

Looking solely from an economic point of view, it is impossible to argue that one geographical area is better than another, for good decisions on interest rates.

Economists are, however, more agreed on the best process for setting interest rates.

The best process is the one now adopted here in the UK, across Europe and in the USA - making an independent central bank responsible for setting interest rates, rather than politicians. Successive Chancellors failed to do a good job, and were never properly accountable to Parliament. I think our independent central bank is proving rather better at delivering low interest rates and low inflation.