By Philip Stephens
You may think the big commercial banks got away with it after the great financial crash. But what about the Bank of England? Britain’s central bank was asleep at the wheel when the storm hit in 2007. Mark Carney’s radical shake-up of personnel and responsibilities in Threadneedle Street is an uncomfortable reminder that failure is sometimes richly rewarded.
The blame does not lie with the present governor. Mr Carney was drafted in from Canada last year to replace the departing Mervyn King. The cutbacks in banking supervision that preceded the crash came on the now Lord King’s watch. A reorganisation that leaves Mr Carney with a total of five deputies, however, is a reminder of just how much additional power has accrued to the Bank during the past few years. When the BoE was first granted independence during the late 1990s, the then governor happily settled for two deputies. Read more
If you read today’s Bank of England inflation report, you will notice some welcome changes. More will follow on this blog about the improvements in BoE transparency. In the meantime, the five things you need to know about the bank’s economic outlook are: Read more
If a close confidant had asked Sir Mervyn King, governor of the Bank of England, a year ago which City institutions he would like to take down a peg or two, the answer might well have been: Goldman Sachs and Barclays.
It has happened more by accident and opportunism than by express design, but during the past six months, the governor has duly hit those banks where it hurts. Read more
It seems Sir Mervyn King's eyebrows speak volumes. Image by Getty
The eyebrows of the governor of the Bank of England could become a force to be reckoned with once more.
In the days before the Basel rules, an eyebrow raised by the top man at the Bank — which was then chief financial regulator — supposedly put a stop to any misbehaviour by the banks.
It took slightly more than a raised eyebrow today. But just hours after Sir Mervyn King described Goldman Sachs’ plan to defer bonuses to avoid the 50 per cent top rate of income tax as “disappointing”, the US investment bank backed down. Read more
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
Commuters pass the Bank of England. Image by Getty
As expected, the Bank of England today kept interest rates on hold at 0.5% and opted not to print more money.
Analysts’ attention has long focussed on the Monetary Policy Committee’s May meeting; it was always more likely to hold off on plumping for more quantitative easing until then. However, its far from certain whether the MPC will opt for further asset purchases on 10 May.
Here are a few of the factors that are likely to sway the MPC’s decision on whether it adds its the £325bn-worth of asset purchases. Read more
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
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