From the Bank of England this lunchtime.
After all the huff and puff about increasing rates they did not - leaving markets dashed in their almost unanimous expectation that a 0.15% was just about certain.
Andrew Bailey really can't manage this process. In any other job he would be sacked for sending out such grossly misleading signals to the market.
But at least they made the right decision, for now.
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0.1 or 0.15 for the short end is pretty much irrelevant. The tapering is more important as inpacts more on the term structure of rates. If you want to beat on Andrew Bailey you should do so with a bigger stick than this!!
This is a very big stick
First it was .1 or .25
And this is virtually all he has to do…
“This is a very big stick”
It really isn’t!!! …The fed tapering carries significantly more weight
We are talking different issues
The base rate has been below 1% since March 2009.
Only two members of the MPC voted to increase rates to 0.25% this time: Ramsden (PPE, LSE, Treasury) and Saunders (LSE, IFS, Salomon Brother, Citigroup). Andrew Bailey did not himself vote for the rate rise that he has been trailing.
Apart from sending a message, I can’t really see why nudging rates up by 0.15% would make too much difference. But I also can’t see the need right now.
The message as all
If it had been increased it would start a rolling increased expected to go over 1%
That has, at least, been deferred
They were damned if they did and damned if they did not.
We can all agree that not changing rates was the correct call….. so, in some sense, I am grateful that they have done a U turn in the face of the evidence.
The error was really to talk about it in the last few weeks.
“Better to keep silent and have everyone THINK you are a fool that to speak and have everyone KNOW you are a fool”
Quite so
That might end up in a tweet….
Be sure to give Abraham Lincoln credit.
Yet another in a long line of ‘not their best moments’.
But it shows you just how inculcated the crap use of interest rates as an inflation control is at the BoE and the elsewhere.
“But it shows you just how inculcated the crap use of interest rates as an inflation control is at the BoE and the elsewhere.”
You might think that but I’m not sure this shows that.. they think the current inflation numbers are transitory.. and let’s face it a move of 5bp is neither here nor there
Ben
Look – the fact that the BoE even raised this whole interest rate rise thing is indicative that some in the organisation believe it be the right thing to do or it would never have got this far. So my observations stand.
As far as ‘signalling’ to the markets and to people like me, it was the wrong thing to do.
But just like Boris and his public standards fiasco with his disgraced MP, the BoE chanced its arm and was pulled up sharp by reality.
Don’t you detect a trend in the way we are governed at the moment? This tactic of behaving outrageously and then hurriedly retreating if public outcry is loud enough?
And as for fighting inflation by inflating the cost of credit? Fighting inflation with inflation? I stand by my opinion that that has always been crap.
We know what one of best inflation retardants is here and its called tax. But tax is wrong apparently because it goes to the Government; interest rates are ‘good’ because they increases profits for private lenders and their investors.
Now….sorry………what was your point exactly?
“Fighting inflation with inflation” is a brilliant way of describing such a tactic.
Neat