Bank of england
If George Osborne had put the Bank of England in charge of compiling the Treasury’s output gap forecasts, he might have been going in to the next election promising even bigger spending cuts.
Around half of businesses understood Forward Guidance. But only 23% of households apparently took on board the Bank’s central message that rates would remain low for longer.
If Mark Carney really thinks it was “unreasonable” to expect business investment to play a part in driving the recovery, he should have a word with his own forecasting team.
Like Jim Bowen The Old Lady of Threadneedle Street is showing us what would have happened if the financial markets had taken its “lower for longer” message on interest rates more fully to heart.
In November’s Inflation Report, published today, the Bank appears to throw up its hands in despair over the UK-US short-term interest rate synchronisation.
While rate increases should be some way off yet, improvements in a range of economic indicators mean that ever more attention is set to shift towards the question of how and when monetary policy tightens. While calls for action are likely to build, the avoidance of premature movement will be vital.
I suspect that what most people are getting at when they ask whether we are seeing a bubble or not is something different. What they really mean is: are houses too expensive?
If Threadneedle Street thought traders’ expectation of rate rises were “not warranted” in July it’s going to be tricky for the Bank to label expectations of an even more rapid rise warranted now.
Here’s the transcript of my interview with Martin Weale of the Bank of England’s Monetary Policy Committee. The write-up will be published in The Independent tomorrow morning.
1) Warns that NGDP target likely to prove inflationary; emphasises practical problems of implementing
2) Says that QE “certainly not parked”
3) Sees no evidence that fiscal multipliers have been higher [...]
The justification for deferring bonuses is to incentivise bankers to take more care over the risks they take. What this research shows is that a three-year delay just isn’t long enough to perform this job.
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