Banca March: Eight members of the Bank of England’s Committee yesterday supported maintaining the level of the cost of money at 5.25%, with only one in favour of a first cut. This marks the first meeting since September 2021 at which not a single voter has supported a rate hike. The governor of the Bank of England has stated that, although it is not yet time to cut rates, they…
J.P.Marín Arrese | The Bank of England will provide direct cash to cover public expenses. Under the Ways and Means Facility, it already offers short-term liquidity to the Treasury. But, from now on, it will finance all budgetary commitments monetising the massive deficit the coronavirus crisis will bring about. Governor Andrew Bailey openly rejected this step a few days ago. Now, faced with the appalling evidence that a sharp increase in spending coupled with plummeting tax revenues will lead to substantial public imbalances, he has changed his mind.
Ranko Berich (Monex Europe) | The macroeconomic policy orthodoxy of the past 30 years will likely lie in ruins by the end of today, as the Bank of England and Treasury embark on synchronized monetary and fiscal easing on an unprecedented scale. The timing and size of the move from the BoE come as a surprise to markets, and seem calculated to send a clear message of policy synchronization.
TwentyFour Asset Management’s CEO Mark Holman thinks central banks will move on rates any time soon, but where the first move comes from might be harder to call. They are sure it will not be the UK, thank goodness and also sure it won’t be the ECB. It won’t be the US in the near future either.
The Bank of England has indicated that the pace of interest rate increases could accelerate if the economy remains on its current track. You have to wonder what the eminent experts on the MPC drink in their tea to be so off course about the current track of the UK economy.
The BoE hiked on Thursday interest rates for the first time in more than 10 years by 25 bp to 0.5%. Given that UK growth continues at its lower potential pace with GDP forecasts at around 1.6%-1.7% between 2017-20, it seems that only one additional hike next year is likely. The country has been the 4th weakest economy in the OECD so far this year.
James Alexander | Not quite the line you will see across most of the market or amongst so-called monetarist economists. In fact, implied by actual nominal growth and expectations for nominal growth monetary policy is too tight. Nominal GDP growth is running at 3.7% YoY and falling, while the best measure of inflation around, the implied GDP deflator is running just below 2%.
One month ahead of the referendum on EU membership, polls show no clear winner. The campaigners aiming to anchor the UK in Europe cannot match the warmongering messages from those eager to steer the country away from the continent.
James Alexander via Historinhas | In a “currency war” it pays to be the loser. If you need an expansionary monetary policy, like most currency blocs today, don’t let anyone undercut with dirty devaluations. So, when a big baby like China decides to lower the value of its currency versus the biggest baby of all, the USD, make sure you are not caught in the cross fire.
James Alexander via Historinhas | The Bank of England published its quarterly Inflation Report for November 2015 last week. The fact that the BoE is missing its 2% inflation target by more than 1% set in train the usual mini-flurry of letters to and from their political masters at the UK finance ministry, aka The Treasury. While reading the Treasury reply I spotted that there had been an “evolution in UK monetary policy”, I was forced to read on.