Understanding the significance of George Osborne’s Autumn Statement is complicated by political posturing. These eight charts will enable you to cut through the spin and surprise people with knowledge of what really matters.
1. Forget the announcements Read more
ECB president Mario Draghi began his monthly press conference shortly after 1.30 GMT. Earlier, as expected, the ECB left rates on hold.
Follow the questions and reaction live here with capital markets editor Ralph Atkins and Emily Cadman
European Central Bank presidents, current and former, are renowned for their fondness to “never pre-commit”. Even when the ECB opted to jump on the forward guidance bandwagon, it did so in a much more halfhearted way than its counterparts.
However, a few months ago Mario Draghi made quite a firm pledge to tell us by the end of the autumn how the ECB intended to go about producing an “account” of the governing council’s policy deliberations. Will Mr Draghi end up breaking his promise? Read more
The British economy is stuttering back into life, with GDP growth beginning to pick up pace and a shrinking deficit giving George Osborne reason to smile ahead of Thursday’s Autumn Statement.
FT economics editor Chris Giles explains the economic backdrop to the Autumn Statement and the options open to the chancellor. Read more
Real business investment grew 1.4 per cent in the third quarter, prompting many City economists such as Howard Archer of IHS Global Insight to welcome the fact that “business investment is finally kicking in”. If so, that is hugely important to the UK economic debate. Investment growth will enable the recovery to rebalance away from squeezed households who cannot easily borrow more and more to support spending for a lot longer, exporters whose prospects depend to a large extent on the still-troubled eurozone, and the government which will continue its austerity drive.
The following five charts about business investment should make you pause for thought and raise quite a few questions about data reliability as highlighted by the Bank of England governor on Tuesday.
Investment in buildings, plant and machinery did not drive Q3 growth
Far from investment being important to the 0.8 per cent real growth and 1.7 per cent nominal growth in the third quarter, this chart shows that the good growth figures were almost entirely generated by household consumption and a build-up of unsold stocks within companies. Investment contributed only 0.1 percentage points to the 0.8 per cent growth. Read more
The Bank of England is a powerful organisation, which rarely hears criticism from insiders or outsiders because economists are quite polite people.
A leading economist I respect sent me these views on the communication of forward guidance, but did not want to be identified. I thought they deserved an airing. So in the style of the secret footballer, here the “secret economist” compares what senior BoE officials say about guidance with what they mean.
What we say … and what we mean
This is the right policy for a recovery … Please forget all that stuff about guidance is the right policy for an economy that is flat-lining.
We have made policy more effective …We can’t explain how. This statement sounds like code for a change in the stance of policy, but we don’t want to re-open that can of worms.
I’ve written quite a bit about the effectiveness of the Bank of England’s forward guidance on monetary policy. One reason is that the BoE has been willing to say guidance “makes the exceptionally stimulative monetary stance more effective”, but not by how much. Indeed, the governor and other officials have always — and sometimes embarrassingly –dodged questions about whether the BoE thinks guidance imparts stimulus at all.
There is no easy answer to the question of how much stimulus has forward guidance imparted. That said, I think I have found a reasonable method for reverse engineering the answer to a different question: what effect did the Monetary Policy Committee believe could be attributable to forward guidance? Read more
By Robin Wigglesworth
A slew of economic news and data has come out over the past 24 hours, some good, some bad, and some outright ugly. But if one thing is clear, the economic recovery of advanced economies is far from assured. Here are five highlights, and things to keep in mind.
1: Markets believe the Fed will keep stimulating the economy
Janet Yellen, the nominee for the Federal Reserve chairmanship, will highlight now the US economy is performing “far short” of its potential at her Senate testimony on Thursday, according to prepared remarks released on Wednesday evening. Deutsche Bank’s Jim Reid points out that while the “tones are certainly dovish, it’s impossible to infer precise policy thoughts from her remarks”. That hasn’t stopped financial markets from rallying on the hope that the presumptive new Fed chairwoman will keep pumping money into the global economy for longer than previously expected. Read more
At Wednesday’s Bank of England inflation report, the Monetary Policy Committee took a look at its August economic forecasts and said “what bunch of extreme pessimists produced these?” No one needs to answer that question.
The MPC then revised its growth forecast sharply higher with the consequence that unemployment was expected to fall much quicker, hitting 7 per cent 18 months earlier than it thought in August. But the best news for people in Britain was that in the November forecasts imply the people in charge of interest rates think inflationary pressures are weaker than in August, so more rapid growth and lower unemployment comes without the cost of higher inflation.
In times past, such an inflation report would have been seen as dovish. Even with stronger growth expected, the inflation forecast was revised down so there was less need to tighten monetary policy. Everyone would have understood the meaning. Read more
Bank of England governor Mark Carney will be taking questions from the press after the release of the bank’s latest inflation report. All eyes will be focused on any changes to the forward guidance
Rapidly moderating inflation – as measured by the CPI – and falling unemployment mean the bank is facing a far more positive economic backdrop than many expected last quarter.
By Emily Cadman, with economics editor Chris Giles and economics reporter Clare Jones at the Bank of England