The Bank of England (BoE) should scrap its rate-setting committee and use quantitative easing as its main monetary tool — before losing its monetary powers altogether, according to a new study.
The bank should also cease targeting inflation and instead focus on nominal (non-inflation adjusted) gross domestic product, "dissident" economist, Anthony Evans, added in the report. This was published on Monday by the Adam Smith Institute (ASI), a U.K. free-market think tank.
"Since the financial crisis, the Bank of England has made important changes to how they conduct monetary policy — such as the introduction of Quantitative Easing and Forward Guidance — and the government has made bold interventions into the banking system. However these drastic measures have failed to identify the root cause of the problem, which is the monetary regime," Evans said in a ASI news release accompanying his report.
The BoE's nine-member Monetary Policy Committee currently sets interest rates with the sole target of keeping inflation at around 2 percent. Most other major central banks also target inflation, with the U.S.'s Federal Reserve combining its price stability mandate with one to achieve maximum employment.
Evans, who describes himself on Twitter as a "dissident monetary economist," said that the BoE should opt for a rules-based system in place of relying on the discretion of its policy committee.
The BoE was not available to comment when CNBC went to publish.
"The Bank of England — and America's Federal Reserve — has done a very poor job of managing our money. They have created artificial booms, followed by genuinely painful busts, through decades of following their unreliable 'discretion'. You cannot fly a modern economy by the seat of your pants: It's time to replace the bank's bumbling with rational rules," ASI Director Eamonn Butler said in the release.
U.K. inflation, as measured by the consumer price index (CPI), has remained below 2 percent since January 2014 and held below 1 percent throughout 2015.
The BoE has held interest rates at a record low of 0.5 percent since March 2009, in the wake of the global financial crisis. Speculation has increased that it could finally raise rates in 2016, particularly in the wake of the Fed's historic decision to do so last December.
Evans argued that in the long-term, the BoE should be stripped off its power to control monetary policy altogether.
In this "free banking" system, individual banks would issue their own paper currency, with the supply of money determined by market forces. The idea was popularized in the 1970s by Austrian economist, Friedrich Hayek, whose enthusiasts included Ronald Regan and Margaret Thatcher. In its purist form, it would eliminate the need for a central bank and there would be no "lender of last resort."