Bank of england
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.
Mr Carney has aggressively attacked the US “Volcker Rule”, which will prevent American investment banks playing the global capital market casino, in strikingly similar terms to the banking lobby. And radical structural reform of the sector looks likely to be anathema to the next Governor.
One might describe the problem not as zombie companies, but a zombie economy. Demand has one foot in the grave. If spending across the economy picked up, one would expect many of those struggling companies to return from the living dead.
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