Bank of England

From FT.com January 2, 2013

Bank of England. Getty Images

Last October, the UK passed the 20th anniversary of inflation targeting. There have been a couple of slight adjustments to the target – in 1997 and 2004, but since 1992 the UK has benefited from a remarkable degree of consistency in its monetary policy framework.

We have to go back to before the first world war – under the Gold Standard – to find such a long period of stability in UK monetary policy. Since then, the only other period that comes close was 1949-67, when the value of the pound was pegged at $2.80 against the dollar.

 Read more

Tags:
Posted in Bank of England |

Claire Jones The debate on scrapping the inflation target

January 2, 2013 7:57 pm by Claire Jones

If Bank of England governor-designate Mark Carney was looking to spark debate, then his call for the UK to scrap its inflation target (should meaningful growth continue to elude the UK) has done the job.

The FT’s economics editor Chris Giles and economics correspondent Sarah O’Connor write in today’s paper that Mr Carney’s call has divided economists in this year’s FT poll.

Those in favour of sticking with the status quo — 45 per cent — outnumber those calling for a shift to a new regime — 35 per cent. (And not all of those in favour of a switch back Mr Carney’s calls for central banks to target nominal GDP instead.) But in previous years, support from more than a handful of economists for the scrapping of the inflation target would have been unthinkable.

Interestingly, support for change is stronger than average among those who have had to work with inflation targeting: of the ten former MPC members that took part in the poll, five want to do away with the current regime, with the rest in favour of keeping it. Read more

Tags: ,
Posted in Bank of England |
From FT.com December 11, 2012

Mark Carney. Getty Images

Mark Carney, the next governor of the Bank of England, has suggested he will act much more aggressively to revive the UK economy when he takes charge next summer, including dumping the BoE’s much-vaunted inflation target if growth fails to pick up.

In a clear break with the views of the BoE’s current senior management, Mr Carney, now governor of the Bank of Canada, said on Tuesday that central banks should consider more radical measures – such as commitments to keep rates on hold for an extended period of time and numerical targets for unemployment – when rates are near zero. Read more

Tags: ,
Posted in Bank of Canada, Bank of England |

Claire Jones The Australian who almost ran the Bank of England

November 28, 2012 4:43 pm by Claire Jones

Mark Carney may be the first foreigner to become governor of the Bank of England in its 318-year history, but he is not the first to be approached.

Back in the 1960s, Harold Wilson’s Labour government wanted to replace Lord Cromer with the governor of the Reserve Australian central bank. This from David Kynaston’s The City of London: The History: Read more

Tags: ,
Posted in Bank of England, Reserve Bank of Australia |

Claire Jones Four things to expect from a Carney-led Bank of England

November 26, 2012 5:30 pm by Claire Jones

Mark Carney appointed as Sir Mervyn King's successor. Image by Getty

1. Mr Carney could introduce a commitment to keep rates on hold for an extended period of time.

Fed chairman Ben Bernanke was not the first to come up with the idea of making a commitment to keeping rates at ultra-low levels for a number of years, so long as inflation remained low. Mr Bernanke’s big idea was copied from Mr Carney’s Bank of Canada, which introduced a conditional commitment in April 2009 – two years before the Fed – with the aim of lowering longer-term interest rates.

2. Expect radical changes to the way in which the Bank operates.

Bringing in a foreigner to head your central bank is very rare – it signals that the government of the day believes there’s something deeply wrong. That Mr Carney has got the job signals the government is intent on root-and-branch reform of the Bank. Read more

Tags:
Posted in Bank of England |

Chris Giles HMT raid on QE from BoE: it gets worse

November 21, 2012 3:55 pm by Chris Giles

Officials I have spoken to since venting my anger at the raid on the government’s quantitative easing surplus have struck a decidedly disappointed tone. It was a shame I didn’t understand that there was no trickery involved; it was a pity I could not see that the move was standard practice in public sector liability management; and it was sad I had questioned whether the the Treasury’s move, which itself eased monetary conditions, undermined the BoE’s operational independence to set monetary policy.

While I have convinced a sizable majority of readers, I note that some people are swallowing these lines without much challenge. Here I will deal with the independence of monetary policy.

Let me be absolutely clear. Sir Mervyn King, BoE governor, rejects my arguments entirely. He wrote on November 9 that the monetary policy committee “was content that its ability to set the appropriate stance of monetary policy would not be affected by this action”. MPC members I have spoken to subsequently have reiterated this argument. They decide monetary policy last, they say, so they are in control. Read more

Posted in Bank of England |

Chris Giles HMT QE raid from Bank of England: it gets worse (2)

November 21, 2012 2:20 pm by Chris Giles

Officials I have spoken to since venting my anger at the raid on the government’s quantitative easing surplus have struck a decidedly disappointed tone. It was a shame I didn’t understand that there was no trickery involved; it was a pity I could not see that the move was standard practice in public sector liability management; and it was sad I had questioned whether the the Treasury’s move, which itself eased monetary conditions, undermined the Bank of England’s operational independence to set monetary policy.

While I have convinced a sizable majority of readers, I note that some people are swallowing these lines without much challenge. Here I will deal with trickery and liability management. In the next post, I will turn to monetary policy. Simon Ward of Henderson Global Investors is the latest to say that anything other than treating temporary profits from QE as government revenue “would be out-of-line with the treatment of other future government liabilities”. Read more

Tags: ,
Posted in Bank of England |
From FT.com November 18, 2012

The three independent reviews of the Bank of England’s performance before and during the financial crisis must have been sobering for the court, its governing body. In polite but pointed language the reviews, published on November 2, confirmed that the BoE was ill prepared to recognise or deal with the crisis in its early days. The BoE’s forecasting was also found to be subject to groupthink.

The reviews provided many detailed recommendations but also made it clear that a full-scale cultural change is needed to address the root causes of the problems. This will be a high priority for the next governor.

 Read more

Tags: ,
Posted in Bank of England |

Chris Giles How loose is UK monetary policy?

November 14, 2012 2:02 pm by Chris Giles

On the day of the inflation report, the Bank of England came out with its most pessimistic medium-term outlook for the economy, suggesting weak growth would not cause inflation to fall below the 2 per cent target. That suggests no room for more quantitative easing. But is that really the case?

How loose is monetary policy? How big is the QE programme? These were all questions that popped up again and again at Bank governor Sir Mervyn King’s press conference this morning in light of the Treasury’s temporary raid on the accumulated surplus of the QE pot. Here is a timeline of what we know and Sir Mervyn’s answers today. Read more

Tags: , ,
Posted in Bank of England |

Claire Jones Poland’s Marek Belka on limits of ‘orthodox’ monetary policy

November 9, 2012 10:23 am by Claire Jones

Marek Belka (right) with José Manuel Barroso, president of the European Commission. Image by Getty

The debate over monetary policy’s limits is, once again, big news.

In recent weeks, Sir Mervyn King, governor of the Bank of England, and his deputy governor for monetary policy, Charlie Bean, have both questioned the usefulness of more quantitative easing. On Thursday, the Monetary Policy Committee halted bond-buying, suggesting the majority agrees with the Bank’s top brass.

It is clear that the MPC now believes that it is running out of options, at least as far as “normal” policy is concerned.

But what is normal? Sir Mervyn has always considered quantitative easing an orthodox monetary policy. Marek Belka, president of the National Bank of Poland, disagrees. Read more

Tags: ,
Posted in Bank of England |
BackOlder entries
Newer entries