monetary policy committee

Claire Jones

Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

MPC minutes

The minutes of this month’s Monetary Policy Committee meeting, out on Wednesday, will reveal whether all of the nine-strong committee backed the decision to expand quantitative easing by £50bn.

Many think the decision will have split the committee. Read more

Claire Jones

Sir Mervyn King has in the past been of the sort of central banker that has, at every opportunity, extolled the virtues of inflation targeting.

So comments at yesterday’s Inflation Report press conference, where the governor conceded that the Bank of England’s monetary policy framework has its deficiencies, were something of a surprise. Here’s what he said:

“I do think the experience of the last four to five years has raised some question marks about what inflation targeting can hope to achieve and whether it’s sufficient. I think our feeling now is, on its own, it’s not sufficient, it did not prevent the build up of a large degree of financial instability. And there is I think a debate to be had about whether other instruments are the right way to deal with that, through our Financial Policy Committee, or whether monetary policy should take other considerations into account.”

Could this be the beginning of the end for the Bank of England’s inflation target, at least in its current guise?

It’s far too early to say. Besides, with the governor due to depart mid-way through next year, whether or not the Bank alters its monetary policy framework will largely depend on the views of Sir Mervyn’s successor.

However, his calls for a debate could prove significant. Read more

Claire Jones

Mervyn King

Mervyn King. Image by Bloomberg.

Hello and welcome to the live blog on the Bank of England’s Inflation Report press conference.

This post should update automatically every few minutes, although it may take longer on mobile devices.

 

 

12.12 The live blog is now closed.

Key takeaways:

  • The MPC’s fan charts now show inflation more-or-less on target over the forecast period, and the risks to inflation are now judged to be broadly balanced. This would suggest that there will be no more QE in May. However, the MPC has also left itself some wriggle room, as inflation is still shown to be a little below target over the next couple of years. The governor also said inflation was “more likely to be below the target than above it for a good part of the three-year forecast period”.
  • The UK economy is still set to recover gradually, though the numbers may “zig zag” over the course of this year as a result of the Queen’s diamond jubilee.
  • Charlie Bean appeared confident that productivity levels would recover (see 11.25). And the governor was also surprisingly forthcoming in acknowledging that there may be flaws in the inflation targeting framework (see 11.36 and 10.53).

11.39 The press conference ends. In response to the final question, the governor says the 25 per cent fall in the real exchange rate is here to stay. Otherwise wage costs would have risen as a result of sterling’s depreciation. Read more

Claire Jones

Investors’ attention will be fixed on Threadneedle Street tomorrow morning, when the Bank of England releases its latest forecasts for inflation and signals whether markets should expect more quantitative easing in May.

Sir Mervyn King’s latest missive to the chancellor, out today, seeks to explain why inflation remains significantly above target. Will it offer any clues about future QE?

Though it’s not worth reading too much into the letter the governor’s words do offer some support to the view that the asset purchases announced earlier this month will be the last. Read more

Claire Jones

The Bank of England’s Monetary Policy Committee has announced £50bn more in quantitative easing, taking the total size of the asset purchase programme to £325bn.

The amount is in line with the consensus view, though some analysts were unsure whether the MPC would back further asset purchases after some positive news on the economy in recent weeks. Read more

The Bank of England meets on Thursday with expectations running high that the MPC will announce a further large dose of quantitative easing. Even if they pass this month, which seems possible, this is likely to be only a temporary postponement. Whenever it comes, the next move will be another bout of “plain vanilla” QE, involving the purchase of £50-75bn of government bonds, and taking the overall Bank of England holdings to over one third of the total stock of gilts in issue.

Meanwhile, the Fed is still debating whether to increase its holdings of long dated securities, and if so whether to focus once again on government debt, or to re-open its purchases of mortgages. Any further QE would be contentious on the FOMC, but there is probably still a majority in favour. Read more

Claire Jones

The Bank of England looks set to announce more money printing on Thursday, with £50bn the amount most analysts expect.

If the Monetary Policy Committee does go ahead and announce more QE, there is little doubt that it will buy nothing but gilts. However, it is less certain what sort of gilts the Bank would buy.

Over the past four months the Bank has bought around £5.1bn a week in gilts. The purchases have been spread out across the curve, with the Bank buying £1.7bn of gilts with maturities of between three and 10 years, £1.7bn with maturities of between 10 and 25 years, and the same amount with maturities of more than 25 years.

However, Sam Hill, UK fixed income strategist at RBC Capital Markets, believes that could change with the next round of asset purchases. Read more

Claire Jones

Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

BofE

The Bank of England’s financial (in?)stability report is due out on Thursday. Read more

Claire Jones

Our week ahead email helps you track the most important events in central banking. To see all of our emails and alerts visit www.ft.com/nbe

FOMC minutes

The Federal Open Market Committee on Tuesday releases the minutes of its policy meeting held earlier this month. The minutes are out at 14.00 local time (19.00 GMT).

This from the FT’s US economics editor Robin Harding on what they’ll cover: Read more

Claire Jones

With UK inflation slowing to 5 per cent in October, most believe price pressures are now past their peak.

But few agree on how fast inflation will fall towards the Bank’s 2 per cent target.  Read more