Where is the evidence to justify the Bank’s action?

I read their forecast carefully. It is rightly riddled with uncertainty.

The good news is they  no longer expect a recession. They anticipate 2% growth this year, and 1.8% growth in 2018. It is difficult to understand why they think growth will reduce to 0.8% next year . There was sufficient monetary stimulus prior to their latest set of monetary actions to justify a higher forecast.

Their forecasts are  contradictory, and struggle to find any bad news, let alone enough to justify their extraordinary actions. They admit that they do yet see a material slowing in consumer growth, yet consumption is the dominant part of GDP. They have had to give up falls in FTSE 100, and even in FTSE 250 as both indices are at or above where they were prior to vote, which was itself a high level. So now they point out that a couple of sectors within the index are weak, financials and construction. There are usually a few sectors that lag or do badly when an index rises, but it does not normally herald recession.

They cite unspecified property funds that have closed owing to redemptions. They do not point out that some of those funds refuse to accept new subscriptions! Nor do they point out that lots of funds have not closed, and do not take such a pessimistic view of property values. I don’t think we can take seriously mark downs when we are not allowed to buy the units so marked down! They do admit that maybe residential property will not fall very much after all, much to the disappointment of all those who would like to be able to afford a home.

It looks as if the Bank has decided it has to get away from its absurd pessimism that we would plunge into the recession they talked about prior to the vote. To do so they  both change the forecast to a more optimistic one and take action on money to claim the credit for staving off the recession they forecast. Many people did not believe the forecast in the first place. It is interesting that the Bank now thinks this year will be just fine, and thought it could delay monetary action by over a month after the vote. It is a pity they did not delay it longer, as I doubt it was ever needed.

 

 

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115 Comments

  1. CHRISTOPHER HOUSTON
    Posted August 5, 2016 at 5:31 am | Permalink

    “A Leap into the dark”…. In my book, dark means dark. For all that, so many people prior to the Referendum on the Remain side had owl vision. They are still of the night. For they can see for months and years into the dark.
    Is it telepathy or some other ESP facility that the BoE knows what the 27 other EU member states are thinking, what they are going to decide and when? Their Parliaments too are on holiday. Perhaps not some politicians in France and Germany. They are busy with other things and it is doubtful they have the time, inclination or power to make trade decisions three years into the dark after Brexit.
    Other nations, not in the EU, are also QE-ing and cutting interest rates. Is it a telepathic empathetic synchronisation? No, it is just what they need to do.
    The BoE has not any evidence of anything. How could it? Most of the American finance journalists are on holiday and it does seem what they write about when at work is precisely what the BoE decides to do..after great and long deliberations over their models.
    We can all read the Wall Street Journal and for a bit of excitement “Market Watch”. What need have we of the BoE?

    • Hope
      Posted August 5, 2016 at 7:41 pm | Permalink

      JR, of course there is no evidence to justify his actions. This is about conditioning the minds of people by your govt. The public stupidly voted to leave the EU and must be chided for doing so despite all the dire warning from Cameron, Osborne, May, Hammond, Rudd Flaon and the other idiots who wanted to subordinate our country to a foreign power. Not happy with lies they asked the good and great to scare us as well as we now learn from the German finance minister who stared Osborne asked him to make comment and then Osborne and co had the temerity to claim the weight of all this they asked not be wrong? Osborne now rewarded by Cameron for telling lies, talking the country down with apocalyptic warnings. Has May renounced all the scare stories? Has May brought in Ministers to support the public view of Brexit or rewarded doom Sayers and traitors? If w had a Brexit PM, like any other organisation a broom would sweep them away and bring ministers to bring about the public wishes. Your party is to blame for Carney and his likes, Cameron is rewarding them! This is corruption when undeserving people are given paid jobs for life on the back of the taxpayers. Cameron claimed he was cutting SPADS, Cameron claimed he was going to clean up Westminster, Cameron claimed he ruled nothing out and would lead the country our of the EU! The serious minded never believed a word he said.

  2. Mick
    Posted August 5, 2016 at 5:39 am | Permalink

    Was watching the news and they had the lib/dems Susan Kramer on slating Brexit and saying how every thing was going wrong, then straight after listening to her drivel you had
    There will be less unemployment, more activity and a greater prospect
    While the Brexit vote had signalled “regime change”, he said Britain’s economy was in a healthy position.
    Mark Carney, Bank of England
    You had to laugh, no wonder the lib/dems are becoming less and less and hopefully wiped out at the next GE

    • Lifelogic
      Posted August 5, 2016 at 7:29 am | Permalink

      Hopefully we can rid of the huge Libdem wing of fake Conservative MPs and ex fake Conservative MPs too.

      • Jerry
        Posted August 5, 2016 at 6:05 pm | Permalink

        @LL; Yes, very logical, considering the MPs you despise obtain the bulk of the votes that get the Tory party elected to government!

    • Denis Cooper
      Posted August 5, 2016 at 7:34 am | Permalink

      A general election which they plan to fight on a pledge of stopping Brexit.

      • Lifelogic
        Posted August 5, 2016 at 12:22 pm | Permalink

        Indeed but will Mrs May ever deliver Brexit, indeed will she even try to deliver it?

      • Jerry
        Posted August 5, 2016 at 6:10 pm | Permalink

        @Denis Cooper; You appear to have a problem with that, and thus democracy!

        • Denis Cooper
          Posted August 6, 2016 at 6:06 am | Permalink

          In case you haven’t noticed we’ve just had a referendum, a major exercise in direct democracy. But if the LibDems wish to show their true colours by seeking to overturn the result through a general election then I welcome that refreshing honesty on their part.

    • David Lister
      Posted August 5, 2016 at 8:33 am | Permalink

      Hi John,

      Please can you provide the reference to the statement ” They anticipate 2% growth this year, and 1.8% growth in 2017. ” as I can not find this in either their “Inflation Report” or their “Summary and Minutes”.

      In Section 2.3, Near Term Outlook for GDP the BoE state that:

      “Overall, the available evidence suggests little growth in GDP in the second half of the year, and growth is projected to slow to 0.1% in 2016 Q3 (Chart 2.13)”

      “The Markit/CIPS measures of business activity — which have on average been a better gauge of official output data than most other survey measures
      reported a sharp fall in output, alongside a steeper fall in expectations (Chart 2.12). Their current levels, if sustained, would be consistent with a contraction in output in Q3. Contacts of the Agents also report a slowing in activity growth, albeit consistent with slightly positive growth. While the Lloyds measure of business confidence, which recovered much of its post-referendum fall in the July release, points to a more gradual slowing”

      Is it possible you have you mistaken your growth figures with the pre-referendum forecast?

      It’s also worth noting that the good GDP figures in the last quarter were on the back of a strong April. The growth dropped to zero, or was in decline, for both May and June as the uncertainty with the referendum outcome began to grow.

      Thanks in advance.

      Reply The Bank’s forecasts are in an annex publication they issued yesterday, which states 2% 2016, 0.8% 2017, 1.8% 2018.

      • David Lister
        Posted August 5, 2016 at 1:03 pm | Permalink

        Thank you, I think you are referring to the document “Conditioning assumptions, MPC key judgements ..”. If so, this does seem at odds with the commentary that they provide in the main report with 0.1% growth in Q3. They must be expecting a bumper Xmas and Q4 as they flood the market with cash to make up for the stagnation in Q3.

        Until the government comes out with a plan on how to accomplish:

        1) EU Immigration Control, and
        2) Access to the EU Single Market inc. services, and
        3) Avoidance of paying EU contributions, and
        4) New Trade Arrangements with the RoW, and
        5) Keeping the Union together (Scotland, N.Ireland)

        .. following the 2 year period then the confusion in the BoE and everywhere else is only going to grow. To the layman (me) these seem to be mutually exclusive. When do you think the government will be in a position to provide some level of clarity, and demonstrate confidence that all of the above are achievable.

        • Peter Parsons
          Posted August 6, 2016 at 11:12 am | Permalink

          David,

          Assuming that, by single market access you mean access without tariffs, I don’t think they will be ever able to demonstrate that all of these are achievable, because they aren’t all achievable as some are mutually exclusive e.g. tariff free single market access with EU immigration control.

  3. Mark B
    Posted August 5, 2016 at 5:50 am | Permalink

    Good morning.

    The construction industry was beginning to slow down prior to the referendum due, in part, to the then Chancellors decision to put an extra 3% BTL properties, plus other laws LL’s have to deal with. This has resulted in developers re-looking at their business models and investment decisions. Property, especially in London and the South East remains strong, probably too strong. So a general slow down in this area would not be unwelcome.

    What is important is, that the government needs to move away from big spending projects that do not offer any real benefit to the economy and start to find ways to bring in business to fund them. A return to the ‘old ways’ of doing things.

    If we need a new runway at Heathrow and/or Gatwick, or anywhere else for that matter, then, if possible, the government should, with out taxpayer subsidy, allow business to invest in such projects and allow them to reap the rewards (ie a special low tax rate) for their investment. We can do it with ISA’s why not with specials shares or private investor schemes ?

    One thing I think we have all learnt from the past year, that you can never trust the so called ‘experts’. Whether they are economists or pollsters, they are no more accurate than the weatherman on a yearly forecast. Too many variables.

    We have far too much politics in far too many areas of our lives for it to be any good. Less is more.

  4. Jack
    Posted August 5, 2016 at 5:51 am | Permalink

    When they cut rates in 2008/09, they actually made the downturn and unemployment worse. They don’t realise that lower interest rates = less government spending = less interest income for the private sector.

    They believe it stimulates private sector borrowing though, and so claim their action saved us from an even worse recession; when in reality it was the fiscal adjustment / 11% fiscal deficit that saved us.

    Their rate cut yesterday was similar. When the recession they predicted doesn’t materialise, they can point to their 25 basis point rate cut and say we’d better be grateful for them saving us.

    We should just rescind the BoE’s independence, expose this for what it is, set the Bank rate to 0% permanently (as per “The Natural Rate of Interest is Zero” by Warren Mosler & Mathew Forstater), and get a Chancellor who actually understands how the consolidated government sector (TSY+CB) operates, for once!

    • Tim Chick
      Posted August 5, 2016 at 6:12 am | Permalink

      John Redwood for Chancellor!

      • Phil Edmunds
        Posted August 5, 2016 at 9:01 pm | Permalink

        It might be safer to think of people who know what they’re talking about.

      • turboterrier
        Posted August 5, 2016 at 9:39 pm | Permalink

        What about Head of the bank of England?

    • Horatio McSherry
      Posted August 5, 2016 at 7:25 am | Permalink

      In a similar vein, Milton Friedman made a good point regarding the Fed. (He also makes a good wider point on the causes of the great depression):

      “In a good year, when things are good, when the economy is booming, you will read that the Federal Reserve, by its wise policy, by its efficacious management of money has produced this fine situation. However let things get bad, and all of a sudden the tone of the annual report is different. Then you discover that despite the best efforts of the Federal Reserve, outside forces combined to produce difficulties.”

    • Anthony Makara
      Posted August 5, 2016 at 3:07 pm | Permalink

      Jack, the BOE’s independence must now come under review and we should pressure MPs and Media to look again at whether this independence is actually working. Gordon Brown granted this independence literally days after Labour’s 1997 election win, yet there was no mention of it in Labour’s manifesto or electoral campaign. Was it a done deal beforehand? Either way the BOE’s record since independence has not been good and in Mark Carney we have Governor who clearly plays politics. Neutral he is not. At the very least, he must go.

    • APL
      Posted August 5, 2016 at 4:18 pm | Permalink

      Jack: “They believe it stimulates private sector borrowing though, ”

      Well it does! But the moment they are forced to raise rates the blow up the economy.

      Every operation that has borrowed at 5% when the rates fell to 2% instead of paying down their principle, they’ve just borrowed more, now the rates are 1/2 percent, they’ll just go out and borrow even more.

      The moment the government is forced to raise rates to two or three percent again, all those folk who levered up on cheap rates are instantly destroyed.

  5. Lifelogic
    Posted August 5, 2016 at 6:08 am | Permalink

    Indeed.

    As you say there are huge uncertainties, in particular what sort of agenda do Theresa May and Hammond actually have. Are they just yet more tax, borrow and piss down the drain, greencrap, EUphile Libdims (like Osborne and Cameron) or are they real Tories who want lower simpler taxes, cheap energy, a bonfire of red tape and real growth?

    Where are they hiding anyway and why have they not made their stance clear? If they did make it clear that real Tories were now in charge it would boost the economy far more than this BoE gimmick.

    What is needed is to get money to real businesses and individuals not the banks. The banks are more like a blood clot in the circulation system. There is little point in shaving 0.25% of base rates if the banks (including the government owned ones) are charging sixty + times this on overdrafts and huge margins and fees on other new loans. Also the red tape around new lending is hugely restrictive, it makes it a very slow process, cutting loan to value ratio’s, and killing many deals as a result. This is hugely damaging to investment.

    One government owned bank refuses new money on loans unless you give up your old cheap margin rate with them, then tries to prevent you from borrowing from other lender on a second charge by not giving consent to it. Indeed second charge lending seems almost to be unavailable at sensible rates, but this used to be very common and a very useful way to borrow for some businesses and other investments.

  6. Tim Chick
    Posted August 5, 2016 at 6:10 am | Permalink

    Perhaps Michael Gove was right – we’ve had enough of experts as they keep getting it wrong and when they do, it is the ordinary people who pick up the bill.
    TJC

  7. Know-dice
    Posted August 5, 2016 at 6:20 am | Permalink

    Brexit is the medicine, the solution, the long road to Britain re-establishing its proper place in the world, rather than being subservient to the dictatorship of the EU.

    At the moment instability is being caused by inaction and the lack of an ongoing plan to move this all forward – This is not a fault of the Brexit vote, after all, we were only asked “Remain” or “Leave” and not how. The previous Prime minister failed to have any plan in place in the event of a “Leave” vote, even though it was clear from the moment the referendum was called that the vote could be close.

    And the Bank of England now just fiddle around the edges and as it seems making thinks worse.

    As soon as the courts have made up their minds about whether Article 50 can be called by the Prime minister or Parliament then Mrs May needs to get her back side in gear and get the whole thing moving… 👿

    • Denis Cooper
      Posted August 6, 2016 at 5:59 am | Permalink

      The good news is that we’ve now had the six week period for legal challenges to the referendum result without any being lodged, as far as I’m aware. The bad news is that instead we have legal challenges to the government’s proposed course of action in the light of the referendum result which will last much longer. The additional bad news is that we can’t be sure that the government lawyers will strain every sinew to win those cases.

  8. Horatio McSherry
    Posted August 5, 2016 at 6:27 am | Permalink

    John,

    As someone who is pretty illiterate when it comes to the detail of economics, I usually keep my thoughts on the BoE and Mark Carney to myself. However, over the past few months Mr. Carney’s punitive behaviour at the bank and his public declarations have shown that not only does he not have the best interests of the country at heart, etc ed The man is totally unfit to hold the position he does. He should be removed.

  9. alan jutson
    Posted August 5, 2016 at 6:38 am | Permalink

    I agree John a very disappointing move, given the so called facts.

    Perhaps Mark Carney is trying justify his existence, so far his entire stint in office has been all talk and no action, as we have had the same interest rates for 7 years in a row.

    I would suggest he feels frustrated and now feels compelled to take action, otherwise what has he actually done, other than to make statements (many of which have turned out to be false) and written letters to the Chancellor about inflation.

    Now Mr Carney can say I saved the Country with my foresight, a bit less to be fair than Gordon Brown, who thought he would save the World, but a legacy no less of so called success, which may gain him an even higher paid job in the future, perhaps with the IMF even, as they will probably be looking for a new chief in due course.

  10. Richard1
    Posted August 5, 2016 at 6:50 am | Permalink

    It is difficult to see why taxpayers should be asked to lend £10bn to selected (by the BoE) UK companies and what good this is supposed to do. I do not see how a 1/4% cut in interest rates nor the further pumping up of bond prices will help businesses better innovate products and services, find new customers, manage their costs etc. What we need is bold supply side measures by the government, not attempts to create inflation by the BoE.

  11. Antisthenes
    Posted August 5, 2016 at 7:01 am | Permalink

    It is said actions speak louder than words and perhaps Carny is taking that advice. However by your analysis words would have been a better choice at this time. He is taking actions that generally appear to have worked in the past although not too much for Japan. Actions taken after the event not before so it may be a case of too much too soon and may do more harm than good. Although harm at some point will be done.

    One thing is certain whenever the actions he has taken short and long term damage is being done. Inflation occurs immediately not perhaps noticeably on the high street but it beavers away in the assets markets. At the same it is storing up debt that one day will return to cripple the economy. I may be wrong and the left maybe right we have found perhaps not a magic money tree but a magic money wand that can be waved at the sign of every looming economic crisis and it will be cured. Perhaps we have found the formula to stop boom and bust. Sadly I do not think so instead we are finding ways to create larger busts and certainly we are making it harder for us to create wealth.

  12. Excalibur
    Posted August 5, 2016 at 7:08 am | Permalink

    Only marginally off topic. Am I alone in being incensed at the sheer waste of money and the incompetence of government over the Independent Inquiry into Child Sexual Abuse ? The resignation of a third head of this Inquiry highlights the inability of Government to get any decision right. The payment of preposterous sums of taxpayers’ money to a New Zealand judge who admits she ‘is unfamiliar with British Law’ beggars belief.

    Why was a New Zealander appointed in the first place ? As with Mark Carney, a Canadian, it seems to be a case of poor judgement by those responsible for the appointments. Theresa May was responsible for the appointment of Dame Lowell Goddard. Why didn’t the judge consider the implications of leaving her ‘beloved family’ beforehand ? In the meantime, two years on, and no prospect of any of the perpetrators being brought to justice. Could the hints of an establishment cover-up be accurate ?

  13. Ian Wragg
    Posted August 5, 2016 at 7:15 am | Permalink

    It’s time Carney was paid off. No doubt he is still in touch with Gideon thinking of ways to undermine Britain.
    Tell me John, why can’t Hinckley Point or similar be financed by public bonds.
    When interest rates are so lousy why can’t the public enjoy a decent return rather than foreign governments and EDF pension fund.

    • hefner
      Posted August 5, 2016 at 7:42 pm | Permalink

      Is everybody in the UK, adults and children, willing to give £300 now for such a bond, for something that might or not produce electricity in 2025?
      I am not sure I would want it.

  14. oldtimer
    Posted August 5, 2016 at 7:15 am | Permalink

    It looks like gesture policy with little practical effect. But the Governor, like many others, hoisted himself on a hook of Cameron/Osborne’s making about the dire cosequences of Brexit. He now needs to get himself and the Bank of the hook with as little reputational damage as he can.

    The current uncertainties will last until the actual terms of the UK’s disengagement from, and future relationship with, the EU are clearer. The trading terms are probably the most important of these coupled with new trading relationships that the UK may or will be able to conclude with the rest of the world. Apart from that all sectors within the UK need to learn to live within their means – government and its agencies, businesses and households. The days of the fool’s paradise are over.

  15. amelinixon
    Posted August 5, 2016 at 7:16 am | Permalink

    It is as though many who hold centre stage are willing things to go wrong to justify their claim that Brexit should be halted or even revesed and what I find galling is the assumption that it really doesn’t matter if Brexit is abandoned. The underlying assumption is that the people who voted for Brexit are ignoramus and can be shoved aside and it won’t matter. The arrogance is absolutely astounding.

    • stred
      Posted August 5, 2016 at 8:38 pm | Permalink

      If anyone wishes to see arrogance in action, go to the parliament channel and watch the Lords debate on the referendum. The Earl of Sandwich is the best display. Why have referenda when the uneducated can make mistakes and the PM could even mislead them. It should be left to Parliament and wise men like himself.

      Having never heard of him and wondering what he did to be so superior an intelligence, I wikied him. He has been on some Lords EU committees and is a descendent of the iventor of the sandwich. Surprisingly, his register of interests shows that he still makes sandwiches and has a stall in Bluewater. Full marks for doing something useful. I must go along, as I live nearby, order a Montagu Whopper and tell him or his serf where to stick it.

      http://www.earlofsandwich.co.uk/our-food.php

  16. Richard1
    Posted August 5, 2016 at 7:17 am | Permalink

    Are companies and other investors really going to find prospective returns on potential projects are improved by a 1/4% cut in the base rate and the sight of the bond bubble being further pumped up, even assuming the rate cut is passed on to potential borrowers? Are equity investors going to say ‘great I only need a 9.75-14.75% IRR instead of 10-15% as I had been requiring’? Who is on the MPC these days? It sounds like it needs some actual investors and business people who are not so inclined to turn to the textbook for guidance.

  17. petermartin2001
    Posted August 5, 2016 at 7:23 am | Permalink

    At one time we would rely on Governments to control the economy by adjusting taxation rates and levels of spending. If there was a need to touch the accelerator, spending could be increased and tax levels reduced. Naturally, one’s political preference might have led to a preference for one or another.

    Now, we’ve pushed all that responsibility on to the Central Bank and we expect them to use the only control lever at their disposal, ie interest rates, to do that. The end result is that we have interest rates which are lower than they have been in over 300 years! Yet still we have a sluggish economy.

    Is this really an improvement?

  18. Denis Cooper
    Posted August 5, 2016 at 7:30 am | Permalink

    But according to the front page of the FT:

    http://www.bbc.co.uk/news/blogs/the_papers

    Carney issued a “stark warning” and the package can only hope to “ease” the “Brexit downturn”, and “250,000 jobs in peril, says governor”.

    And as all this is just because we voted to leave the EU it can easily be imagined how catastrophic it would be if we did actually leave; therefore we should be grateful to bad losers like the FT for pointing this out so we belatedly see sense and agree with them that the referendum result should be ignored or reversed.

    In fact a few days ago another bad loser had a whole article headlined:

    “Reversing Brexit”

    https://www.project-syndicate.org/commentary/reversing-brexit-referendum-by-anatole-kaletsky-2016-07

    Apparently:

    “An EU strategy to avoid Brexit, far from ignoring British voters, would show genuine respect for democracy.”

    Because:

    “The essence of democratic politics is responding to public dissatisfaction with policies and ideas – and then trying to change the judgment of voters. That is how numerous referendum outcomes – in France, Ireland, Denmark, the Netherlands, Italy, and Greece – have been reversed, even when deeply emotional issues, such as abortion and divorce, were involved.”

  19. Anthony Makara
    Posted August 5, 2016 at 7:37 am | Permalink

    Older readers will remember the days when politicians were led to interest rate cuts/hikes by media pressure rather than holding their nerve and doing the right thing. Now we see exactly the same thing coming from the BOE and the politically conscious Mark Carney. The nonsense that ‘Brexit’ has caused an economic downturn is being played up by liberal media and of course there are people who want to believe that. Mark Carney is one of those people. This media fails to inform the public that we haven’t even left the EU yet and won’t be leaving for a number of years. Yet the same media expects us to believe that the economy has suddely turned on a sixpence and is heading for collapse. all because of Brexit. There is a dishonest agenda at play here. Remainers and the BOE are working to show, before we even leave the EU, that our economy can’t survive without the EU, all this is aimed at a push for a second referendum, a few years down the line. Media creates narratives and politicians are more than happy to follow. So too is Mark Carney, he nailed his colours to the mast long before June 23rd.

  20. agricola
    Posted August 5, 2016 at 7:43 am | Permalink

    I would suspect that the BoE are bumbling along in a maze, largely of their own making. They seem to have lost the map.

    I want to see someone, anyone realise that the UK thrives on creation, be it financial or manufacturing. This means taking an item, enhancing it’s value and selling it on, preferably as an export. That someone, preferably the government, taking this on board and facilitating the process with tax levels that encourage more and more entrepreneurs to partake.

    Having done this , the government is then entitled to skim off a small percentage to finance the things it needs to do in Defense, Education and Social Services to support the needy not the congenitally lazy. Beyond that ,private finance can provide all the other necessities including the NHS, provided that it is prepared to operate within rules laid down by government. I am not hung up on the NHS being funded entirely and directly by taxation. It is in part already privatised, and many people pay for their medication. I feel that a service that has to attract patients/customers is likely to be better than the current take what you are given service. Providing the services offered operate within clear guiding rules, competition should improve the end result. The population via tax and government would be the ultimate paymasters.

    The apparent ineptness of the BoE which you highlight , occured because they made the mistake of involving themselves openly in the politics of Brexit rather than concentrating on providing the best financial climate for the UK to thrive irrespective of the Brexit result.

  21. Tom William
    Posted August 5, 2016 at 8:04 am | Permalink

    Carney’s forecasts, starting with his aim of 2% inflation, should be exposed, he should go and the bank should lose its independence. But is that politically possible and could political control be sure to be better?

    More QE makes us look, potentially, more and more like Argentina.

    • Denis Cooper
      Posted August 5, 2016 at 1:11 pm | Permalink

      The 2% inflation target has come from successive Chancellors – Brown, Darling, Osborne, and now Hammond:

      From Hammond’s letter to Carney dated yesterday:

      http://www.bankofengland.co.uk/monetarypolicy/Documents/pdf/chancellorletter040816.pdf

      “I confirm that the government’s commitment to the current regime of flexible inflation targeting, with an operational target of 2% CPI inflation, remains absolute. The target is symmetric: deviations below the target are treated the same way as deviations above the target.”

    • petermartin2001
      Posted August 6, 2016 at 3:46 pm | Permalink

      @ Tom William,

      Before you start making those kind of comparisons you need to look at where money comes from. It’s all just printed or created in a computer. That’s just as true for a country with 1% deflation as we might find in places in the eurozone as it is for a country with 50% inflation.

      It’s how much money that is created, and spent into the economy, as well as how much money is taxed away and out of the economy which are the key fiscal parameters which all governments need to get right.

      Too much one way and we have high inflation. Too much the other and we have recession or even depression.

  22. Brian Tomkinson
    Posted August 5, 2016 at 8:14 am | Permalink

    Has Mark Carney produced a correct forecast yet? All this seems to be based on surveys of people’s intentions rather than musg evidence. Not surprising since referendum was only 6 weeks ago, we are still in EU and there has been an avalanche of negativity from Remoaners and their pals in the broadcast media. Good news on investment and new jobs has been largely ignored and the government seems to have gone into purdah regarding leaving the EU. We shouldn’t underestimate the forces at work to overthrow the democratic will of the British people.

  23. Iain Moore
    Posted August 5, 2016 at 8:15 am | Permalink

    A 0.25% cut in interest rates from 0.5% is a pointless gesture, something that isn’t going to have any discernible effect on the economy. It could be said to be an action to effect sentiment in the economy if it hadn’t followed Carney’s doom laden participation in project fear. As such the only thing I can see this interest rate cut was trying to achieve, was something for Carney to point to to justify his intervention into the referendum debate.

  24. The Meissen Bison
    Posted August 5, 2016 at 8:30 am | Permalink

    One has to wonder whether the BoE has been taken over by the BBC.

  25. Caterpillar
    Posted August 5, 2016 at 8:42 am | Permalink

    I think there are several possibilities to what is happening;

    (i) JR’s final paragraph is correct and the BoE/governor behaviour is political. Either a pre-emptive move has been a success, or if the policy causes problems then – we told you Brexit was problematic and despite our best efforts this has happened.
    (ii) BoE sees another chance to look after friends with large asset holdings and London centric its
    (iiia) Naivety light – believing a particular macroeconomic model
    (iiib) Naivety medium – believing GDP represents the economy
    (iiic) Naivety strong – believing the economy is the goal not a the constraint

    But I do have my own lack of confidence; no Article 50 so no new relationships, no change to governor, closed for business signalling (e.g. stopped Hinkley Point investment) …

  26. JohnF
    Posted August 5, 2016 at 8:47 am | Permalink

    I read somewhere that Lloyds business confidence barometer (??) had slumped in early/mid July but had rebounded quite strongly since. Does anyone know anything about this index and does it have any predictive skill?

  27. forthurst
    Posted August 5, 2016 at 8:48 am | Permalink

    RBS still losing money. Now we have a new Chancellor, perhaps he should be encouraged to do what Gideon CH failed to do which was to break it up; where I am, the largish RBS branch in a prominent position always seems empty; turning it into a Wiliams & Glyns and flogging it to a Spanish bank does not seem a good idea either, since a foreign retail bank lends money into existence, syphoning interest and capital out of the economy and then syphons the resulting created excess money after expenses (profits) out of the country; let’s keep bank profits resulting from the privilege of being able to fabricate money without going to prison within our own economy.

    • Lifelogic
      Posted August 5, 2016 at 12:27 pm | Permalink

      RBS/Natwest are indeed still losing money and yet still overcharging their customers hugely while damaging their customers with a very restrictive and over priced lending policy.

      The government shooting itself in the foot yet again.

  28. a-tracy
    Posted August 5, 2016 at 8:53 am | Permalink

    Will the student loan interest drop from 4% now the interest has dropped because I’m failing to see how this will help the majority of people. 70% of those with mortgages I read fixed their rate, business loans (especially for SMEs) are fixed rate.

    Currency manipulators may benefit I guess, but savers and investors will be punished on the swing, so I don’t understand how this persuades business owners to borrow more when other counteractions cause them to hunker down.

  29. LondonBob
    Posted August 5, 2016 at 8:56 am | Permalink

    Extraordinary decision, I was hoping we would start normalising interest rates.

  30. Bob
    Posted August 5, 2016 at 9:00 am | Permalink

    I find it disconcerting that Carney continues with his attempt at economic vandalism without criticism from govt. It occurs to me that the largely pro EU Cabinet together with their corporate buddies are attempting to confect reasons to back away from a full Brexit.

  31. Adam
    Posted August 5, 2016 at 9:03 am | Permalink

    Still didnt predict the 07 event. Its a lot of rune gazing. Sheep entrail mixing. Like the Global Warming prognosticators.

    This backtracking is hilarious though. Ther needs to be a list of all their crazy prognostications

  32. MikeP
    Posted August 5, 2016 at 9:08 am | Permalink

    The writing is on the wall, Brexit will be blamed for all economic shortfalls for the foreseeable future. Long before the referendum, there were jitters over Greek debt, Eurozone stagflation, Italian banks near crisis point, Southern European youth unemployment, a slowdown in China and concerns over the reliability of their economic forecasts, the US economy up and down and speculation over the next Presidency, QE and devaluation in Japan, Russia and Ukraine tensions, Syria and the Turkish border. Now all these factors remain to be addressed but Brexit is the convenient scapegoat as each ‘chicken comes home to roost’.
    In any other month, the provisional ONS figures for GDP growth would carry a health warning that Construction and Manufacturing data is notoriously tardy but this time it’s all gloom and doom despite ONS’s estimate giving us faster growth than France, Germany and elsewhere. Why couldn’t Carney and his MPC just wait for a full quarter as Philip Hammond plans to do, rather than risk talking us into a self-fulfilling prophesy?

  33. Richard Butler
    Posted August 5, 2016 at 9:08 am | Permalink

    Cathy Newman on Ch4 News loudly proclaimed unemployment is expected to rise, huh? Where did she get this from? Over and again the bitter Bremains take every opportunity to drive home negative sentiment to cause gulliable people to put activity on hold in order that the Bremoaners can claim thier beloved academic experts were right all along and call for another referendum.

    Would very much like to hear Johns ideas on the deal we should aim for with the EU.
    We need to stem the flow the negative opportunists are taking advantage of, and settle on a trade arrangement with the EU ASAP

    • majorfrustration
      Posted August 5, 2016 at 2:01 pm | Permalink

      A few words from David Davis might not go amiss – like who we are talking to – shame that the likes of DD are not our there pushing the message that things are happening and its not all gloom and doom. However given the feelings of a growing section of Europeans in France,
      Germany and Italy the Remainers may well find themselves fighting to remain in an organisation that is close to collapse – Italy Banks are about to go belly up unless there is another accounting slight of hands. Heseltine and Hush Puppy Clarke will eventually prove to be rather outdated.

    • sjb
      Posted August 5, 2016 at 7:08 pm | Permalink

      Her source may have been the jobs’ report published by the Recruitment & Employment Confederation, available at https://www.rec.uk.com/news-and-policy/press-releases/permanent-placements-fall-at-sharpest-rate-in-over-seven-years/_nocache

  34. alan jutson
    Posted August 5, 2016 at 9:13 am | Permalink

    I see it is now being reported that most Banks will not pass on the rate reduction to their customers.

    Given that was the whole point of the action, (to reduce borrowing costs, to stimulate investment) We will now see what resolve Mr Carney has, if he has any, in making sure that action is taken to ensure it happens.
    Failure to make it happen, means that all he has done is to increase the Banks margins, something they have ben good at over the years themselves.

  35. formula57
    Posted August 5, 2016 at 9:19 am | Permalink

    Another deft manoeuvre gives further victory to the Bank of England in the currency wars.

    With the USA heading for recession (and thence a Trump presidency) and China slowing appreciably, it is perhaps very well timed too, especially if it allows Brexit to proceed to completion in economic circumstances better than those prevailing in the rump EU.

  36. Vanessa
    Posted August 5, 2016 at 9:25 am | Permalink

    The editors of MoneyWeek are predicting a collapse similar to the Weimar Republic and I think they have a point. Brazil and Venezuela are seeing this now. There will be a meltdown of our economy and society – not a pretty sight. I am getting out – fast !

    • Richard Butler
      Posted August 5, 2016 at 12:31 pm | Permalink

      Ha, the good old Moneyweek perma crash story, I’ve been commenting on this for over 10 years. You should read the book Futurebabble which explains how these perm-bears have predicting one form of Armageddon or another for centuries, it’s good business as it has an ever ready audience, and of course when the odd crash comes along they can say they were right. Did you know Peak Oil has been predicted something like 5000 times in the last 100 years, lol.

  37. Leslie Singleton
    Posted August 5, 2016 at 9:28 am | Permalink

    I must say I was surprised to watch the BBC TV’s Ahmed talking to Carney. One would never have guessed from the way that the Bank in its report talked about what “will be” rather than what they “believe will be” that they were just issuing a (dodgy) forecast–and I was truly taken aback when (perhaps via editing that made Ahmed seem more abrupt on purpose??) Ahmed ups and asks Carney to confirm that this mere forecast was “the cost of Brexit”–and, if that weren’t enough, Ahmed asked what happens if this forecast on growth “gets worse” (What more could the Bank do, blah blah?) which is crazy given that it hasn’t happened yet (and probably won’t). Many not in the least worried before, will be made so now. How could anybody not believe that the Bank has negatively and unnecessarily influenced what actually happens? Much more of this plus the delay and we will indeed have a second referendum (and if necessary a third).

    • zorro
      Posted August 5, 2016 at 4:57 pm | Permalink

      Yes, clear media manipulation of the argument….

      zorro

  38. Leslie Singleton
    Posted August 5, 2016 at 9:39 am | Permalink

    We are replacing one situation with another. The new situation will take time to crank itself up and in to place. I detect no ability by either the Bank or the BBC to predict the result of the new situation so they should both shut up. At best at present they are showing a bad case of nerves. Steady the Buffs!

  39. Lifelogic
    Posted August 5, 2016 at 9:51 am | Permalink

    Are the many (indeed majority) remainers in government (Commons and Lords), the BoE and the state sector perhaps just manipulating the situation to soften up the public for a second referendum?

    So that Brexit in the end means nothing of the sort.

    • Handbags
      Posted August 5, 2016 at 2:17 pm | Permalink

      A second referendum isn’t a problem – because the vote for Brexit would be even greater.

      The whinging of the parasite sector, aided and abetted by the left wing TV media, is simply turning people against them – never has their self-serving bias been so transparent.

  40. Atlas
    Posted August 5, 2016 at 10:08 am | Permalink

    I agree John, the BOE actions defy logic – unless that logic is to prevent loss of face for a certain Governor??

    • Lifelogic
      Posted August 5, 2016 at 12:30 pm | Permalink

      That could well be it, difficult to see any other reasons.

    • Handbags
      Posted August 5, 2016 at 2:08 pm | Permalink

      Spot on!

      He can’t now admit he was wrong because his credibility will be shot.

      He’s trying to pretend that his strong actions will save the day when in reality no action was necessary.

  41. Bert Young
    Posted August 5, 2016 at 10:10 am | Permalink

    Carney and his committee have boobed again . We do not need to make it more expensive for the ordinary shopper , we need to show confidence that we are in good shape and can look forward to an invigorated economy .

    Hammond now needs to follow up with an across the board drop in taxation levels ; he should not wait until the Autumn . Revenues would benefit and consumers could resume their spending spree . At this holiday time it is stupid to clobber the cost of vacations with a drop in the £ against the Euro ( a falsely valued currency anyway ).

    Theresa has to clarify a policy to stabilise the country and to show to the world that Cameron and inexperience has gone . Some sage and wise outside advisers are just what she needs .

  42. Colin Hart
    Posted August 5, 2016 at 10:12 am | Permalink

    The Bank of England seems to be hell-bent on doing everything they can to make their pre-referendum predictions come true.

  43. Denis Cooper
    Posted August 5, 2016 at 11:02 am | Permalink

    JR, I wonder whether you and some of your colleagues – Bernard Jenkins, Bill Cash and maybe others – would be interested in making contributions to this new crowdfunding exercise to pay the lawyers for another legal challenge, the £10,000 previously raised being insufficient to pursue the case:

    https://www.crowdjustice.co.uk/case/parliament-should-decide/?utm_source=sendinblue&utm_campaign=BREXIT_CASE_UPDATE__JOLYON_4816&utm_medium=email

    Like you these people believe that the government should not put in an Article 50 notice but instead seek an Act of Parliament.

    The difference is that they want the government to go down that route because they see a very good chance that Parliament would stop Brexit, while you assume the contrary, that despite their pro-EU majorities both Houses would readily pass such an Act.

  44. Newmania
    Posted August 5, 2016 at 11:06 am | Permalink

    Poor Carney , if he was really a member of the vast anti Brexit conspiracy, BBC, IMF, SPECTRE ….. he would sit on his hands and let the sheer misery do its work
    A bout of recession over the next year would be just what need to assist in selling what I very much hope will be continued membership of the single market.
    Instead he has gone for the optimistic end of current forecast and will probably be obliged to drip feed the true horror as we go along.
    I agree with John , I would like the Bank of England to do nothing . I would like the country sink and a few high profile closures wouldn’t hurt
    Bad though this is it is infinitely better than the decades of failure that Brexit will bring not to say the increased debts that will be passed onto our children. I suspect I am far form alone in doing this calculation in some form.

    • Mitchel
      Posted August 5, 2016 at 12:54 pm | Permalink

      In case you hadn’t noticed your remainer friends have already massively increased the debts that will be passed onto our children.And there have been lots of high profile closures in recent years -it’s what happens in a capitalist economy at a time of rapid technology change-and we have taken them in our stride.

      Have you booked your oneway ticket to Euroland in order to escape this Armageddon yet?

      • fedupsoutherner
        Posted August 5, 2016 at 9:05 pm | Permalink

        Mitchel. Newmania’s exile can’t come soon enough.

    • Richard1
      Posted August 5, 2016 at 12:56 pm | Permalink

      Certainly a lot of commentators on the Remain side are hoping, like you, for bad economic news to prove themselves right.

      Reading your posts it is a wonder how countries such as Singapore Hong Kong and Switzerland have done so well outside the EU. Perhaps every country in the world should apply to join?

      • Newmania
        Posted August 5, 2016 at 8:25 pm | Permalink

        One of the ways Switzerland does well is by locating its Banking in London because the endless and difficult series of bi lateral treaties it has with |Europe do not work well enough for it to enjoy pass porting rights of capital and compliance
        Despite this clearly inferior situation Switzerland has to accept Freedom of movement . The point for us though is that after 8 years of dodging bullets anyone unfortunate enough to work for a Swiss Bank in London is just one of the many people wondering if they will ahead job in a years or two ,.
        Oh course John Redwood may not care about families under threat if they work in banks ( boo hiss) but I do

        I can`t see what our structural debts have to do with Remain, they were acquired by the Blair and Brown administration and left George Osborne ( who I still admire a great deal) with an impossible task which he discharged with a lot of skill . After 8 years in which great sacrifices had been made to stabilise this position people like John Redwood are openly calling for the state to start of throwing borrowed cash around to disguise the effect of Brexit ( Investment as this activity is known)

        Mt Carney has signalled that the Bank oif England cannot do all the work and we are going to have to take on more debt . With National debt over 81% of GDP we should be saying something “Gulp…” or “ Eeeek” . This is especially concerning as our current ultra low borrowing cost is a temporary affect caused by money hiding from the real economy

        On what I take to be the plan to turn the UK inot an Atlantic Hedge fund Pirate ship whilst that might please the people who paid form the Brexit campaign it will not do for me . Brexit happily included maternity leave and holiday entitlements in their calculations of ‘red tape’ to be swept away and whilst they may wish to claim this was no more true than the rest of their nonsense I suspect they may have accidentally told the truth .

        The world`s most productive economy is Germany

        Reply I think Norway is more productive than Germany. The Leave campaigned argued to keep all our current EU derived employment protections. Do check your facts occasionally.

    • Sir Joe Soap
      Posted August 5, 2016 at 12:58 pm | Permalink

      It’s like you were just born.
      Find me those glorious surpluses from which we’re about to sink into a sea of debt!!!

    • Denis Cooper
      Posted August 5, 2016 at 12:58 pm | Permalink

      Just what the Telegraph editorial said today:

      http://www.telegraph.co.uk/opinion/2016/08/05/dont-blame-brexit-for-this-rate-cut-blame-project-fear/

      “Make no mistake: the UK has made its choice. The voters want to leave the EU. Some commentators lament this decision and seem actively to will that it turns out for the worse – so that they can cry “I told you so!” when their grim prophecies of economic decline turn out to be self‑fulfilling.”

    • Richard Butler
      Posted August 5, 2016 at 1:20 pm | Permalink

      Utter bilge, it is in everyone’s interest that EU /UK trade continues unhampered and thus an acceptable trade deal will be found, and quicker than you think (EU honchos have made it clear they want the basic deal fleshed out quickly), and then we will prosper like never before given our new found nimble autonomy, safe haven status (improved by leaving EU) and global orientation. Your words mind me of the flat earthers that always fear change whether it be the iron horse, the far oceans or the internet. The British Tiger roars.

    • Anonymous
      Posted August 5, 2016 at 2:41 pm | Permalink

      Newmania – Assuming Brexit is going to be as bad as you say…

      Every four years we run the risk of a Labour Govt which is damaging to the economy but we put up with it because … it’s democracy !

      Shall we ban elections ?

      Years and years of your class turning a blind eye to working class areas being overwhelmed led to Brexit and there was plenty of warning that it would happen.

      Did you not imagine that this would have consequences ?

      Be thankful that we chose the ballot box and not the bullet.

    • ian wragg
      Posted August 5, 2016 at 4:40 pm | Permalink

      I think your on the wrong blog.
      The “We’re the party of IN” was decimated at the last election.
      Are you homeless.
      A few high profile closures…………… look at Italy and Greece, there are quite a few banks on their last gasp. They should suffice for you.

    • zorro
      Posted August 5, 2016 at 5:05 pm | Permalink

      Dream on….

      zorro

    • stred
      Posted August 6, 2016 at 7:42 am | Permalink

      Newremainia.
      Poor Carney- 16,ooo quid a week for playing politics and altering interest rate by 0.25% in 8 years.

  45. Friday5
    Posted August 5, 2016 at 11:11 am | Permalink

    It’s brilliant someone with brains can challenge “them”.
    Loved that reply yesterday” We are not all Muppet Voters….
    Who are “they” and why are they defying all logic is what I’d like to know.

  46. William Long
    Posted August 5, 2016 at 11:11 am | Permalink

    In ‘normal’ times (say with a 5% base rate) a 25 bps cut in base rate would be regarded as negligible and unlikely by itself to have any effect, so why bother with it? IF there is now a problem, then infinitessimal tinkering with base rate is unlikely to cure it without fiscal action at the same time, and if we need this, then the Chancellor should come back from wherever he is and do something about it. If there is no problem, then the Chancellor should make this clear, even if doing so did embarrass the Governor.

    • Denis Cooper
      Posted August 5, 2016 at 12:54 pm | Permalink

      It seems to me that it’s just a token because the media were agitating for action to mitigate the terrible economic collapse that we’ve faced since we foolishly voted to leave the EU. If it calms them down and they stop their defeatist talk then it will have served a good purpose.

  47. Iain gill
    Posted August 5, 2016 at 12:04 pm | Permalink

    Re the protest on the roof of the leader of the opposition, I must say I agree with father’s for justice, and about time the political class listened to them.

  48. lojolondon
    Posted August 5, 2016 at 12:08 pm | Permalink

    The weakness of the BOE in following the Chancellor’s line over the last 6 months has lead directly to this situation. I believe the BOE is cutting rates for one reason only – so they can pretend to take credit for their being no recession. Time to find a new governor, methinks.

    • Lee Moore
      Posted August 5, 2016 at 10:25 pm | Permalink

      Read: “Mark Carney has proved that staying in the EU is the risky choice”
      Published in the Telegraph, October 22ndnd, 2015…
      His stance was so different to everything after that report came out in the media, he looks like he has been got-at…

  49. John Swannick
    Posted August 5, 2016 at 12:15 pm | Permalink

    Are Rational Expectations still fashionable? Maybe the Bank is trying to talk down inflationary pressures and take heat out of fastest (only) growing economy in Europe so as not to embarrass our friends.

  50. fedupsoutherner
    Posted August 5, 2016 at 12:50 pm | Permalink

    I give up John. I am more and more of the opinion that all this has been done to show that Brexit is bad for the UK and we can’t leave. Never before have so many people felt that politicians cannot be trusted and is it any wonder? Just what is TM doing for goodness sake? I do hope we are all proved wrong but I am doubtful.

  51. Bob
    Posted August 5, 2016 at 1:02 pm | Permalink

    Brexit ‘could cause mortgage rises’
    David Cameron

    http://www.bbc.co.uk/news/uk-politics-eu-referendum-36454017

  52. CHRISTOPHER HOUSTON
    Posted August 5, 2016 at 1:53 pm | Permalink

    Off topic:
    Can it be true that Mr Corbyn, a life-long opponent of the House of Lords and all that rich stuff has tried to get Shami Chakrabati to be a Peer. I thought she too was opposed to the ermined aisles of meritocracy? Lord Two-Jags is another who someone gave a quick right-jab to make him become respectable. He started putting on his aitches. Sounds haffected.

    • CHRISTOPHER HOUSTON
      Posted August 6, 2016 at 1:47 am | Permalink

      Update:
      Mr Corbyn has now offered an explanation of why he has nominated Ms Chakrabati for a Peerage> He says it is because she is very much against having a Peerage and wholly disagrees with having a House of Lords. He also says he would not have even dreamed of nominating Ms Chakrabati if it had been otherwise. So that’s clear.

  53. Dennis
    Posted August 5, 2016 at 1:59 pm | Permalink

    “yet consumption is the dominant part of GDP. ”

    This presumably will help me too if I consume more rapidly than usual my fixed savings.

  54. Atlas
    Posted August 5, 2016 at 2:12 pm | Permalink

    Are many others here also getting progressively more fed-up with the whingers and whiners on TV (presenting as well as being interviewed) who did not like the democratic ‘once in a lifetime’ referendum result?

    Are the BBC receiving money from the EU still? Is this influencing their editorial policy?

    • Denis Cooper
      Posted August 6, 2016 at 5:47 am | Permalink

      On the Sky press review last night there was the pro-EU presenter, plus a guest who is the editor of a newly launched newspaper which “is not aligned with old political divisions but with an enthusiasm and love for Europe; a new quality paper that gives voice to the values of the 48%”, and another pro-EU guest.

      I wondered whether the newspaper is being funded by the EU, but as most of the eurocrats seem to have accepted defeat as far as retaining the UK in the EU is concerned I think it would have to be indirect funding through one or more of the so-called “charities” and other such organisations funded by the EU, and at their initiative rather than the EU’s. Or it could just be wealthy people in the UK, or one or more of the rich international busybodies like Soros.

  55. JamesG
    Posted August 5, 2016 at 2:34 pm | Permalink

    The history of rate cuts at the time of the crash was that each cut signaled just desperation, hence there was even less general confidence than before. These central bankers never seem to learn anything! How could a 0.25% cut possibly make any difference anyway? If the rate was 10% and there was a 2% cut it would be important but 0.25%? It’s crazy!

    As JR says, they are simply preparing the ground for pretending they rescued the system when in fact they caused this phoney-war crisis in confidence in the first place with their loose lips. There is plenty to worry about with the UK economy but none of it is due to being in or out of the EU. It starts with the deficit and ends with the ever-mounting pile of debt.

    As with the IMF, recently rebuked by their own watchdog, the BoE has been a cheerleader for the EU based on nothing but misplaced dogma.

  56. ian
    Posted August 5, 2016 at 3:18 pm | Permalink

    QE is a unlimited operation and could go to the end of the century and if you have no assets, things for you will not improve much because for most people the ladder has been taken away, as you fined yourself and your country in special measure which could last for the rest of your life as you look on at politician and their experts rising asset prices and making new laws to keep you in your place.

    Well i ask you what are you going to do about the problem you fine yourselves in.

  57. TomP
    Posted August 5, 2016 at 3:45 pm | Permalink

    Mr Redwood. You say about the suspended property funds: “They do not point out that some of those funds refuse to accept new subscriptions!” (Oh – and it’s not hard to find – see http://www.mandg.co.uk/investor/funds/prices/property-fund-prices/continuation-of-temporary-suspension-of-mg-property-portfolio/)

    That’s because the funds cannot under the rules accept new subscriptions. A suspended fund suspends all dealings. Not just redemptions. See https://www.handbook.fca.org.uk/handbook/COLL/7/2.html?date=2016-06-17.

    Very surprised you don’t know that.

    Reply My point us they did not need to suspend!

  58. Tim Bennett
    Posted August 5, 2016 at 4:10 pm | Permalink

    My personal opinion is that this action by the Bank of England constitutes an act of personal reputation management by Mr Carney and his colleagues, rather than an act justified by any genuine downturn. It is far too early to judge whether there has REALLY been a downturn caused by Brexit. However, after so unwisely and inappropriately wading into the Referendum debate, Mr Carney now faces a problem. If there should not be a downturn, he and his bank subordinates stand exposed as either knaves or fools – knaves, if they were acting as political lackeys of the now discredited former Chancellor, fools if their economic forecasting is shown to be risibly incompetent. But now, after yesterday’s actions, if there is no significant downturn Carney and Co. can claim it was their “swift and decisive action” that brought confidence back to the economy and prevented calamity. Of course, it will be completely impossible to prove or disprove their contention.

    • Sir Joe Soap
      Posted August 6, 2016 at 8:47 am | Permalink

      Precisely.
      £ was just stabilising, unemployment inflation and GDP seem fine. Now they’ve started putting the boot in, anything could happen. We need a sustained commentary of “what if they’d continued to carry on as usual” versus what they’ve done here.

  59. Stephen T
    Posted August 5, 2016 at 4:36 pm | Permalink

    The Guardian ran an article on 19th May in which one of the MPC members (Jan Vlieghe) stated he thought interest rates would need to be cut regardless of the referendum outcome… Sorry I don’t know how to link.

    As an aside, am wondering if BBC now stands for Blame Brexit Continually? Project Fear seems to have morphed into Project Bottom Lip. The Telegraph on the other hand has numerous positive stories.

  60. ian
    Posted August 5, 2016 at 4:43 pm | Permalink

    I see in the newspaper that EU is saying pay us 20 billion or we will not let you leave but that the whole point of article 50 anyway, like i say negotiation with the EU is for the birds, they have nothing to give only regulation and laws and will look to take from you because you will have something to take like fishing grounds and money,

    Negotiation will have to be done after you have left, that the only way to do it and they can not stop you from doing that way, it is parliament that stopping you from doing it that way because they want to stay in with there friends and experts.

    John is mostly right on his points but needs a new parliament to get the job done and that is your job the public to vote them out, all 290 con party MPs and 176 labour MPs.

    Without that happening not a lot can be done, it just going to be a very long process and may not happen with these people in parliament with their QE and media con job..

    • Denis Cooper
      Posted August 6, 2016 at 5:31 am | Permalink

      I take it for granted that the UK government will seek to honour all its obligations legitimately incurred while we were in the EU, including the obligation to pay its share of the EU expenditure which has not yet occurred but has been pledged for future years. In this instance the UK government and Parliament knowingly agreed that the EU could proceed on a system of making payments as due but also making forward commitments, as discussed here in February 2013:

      http://openeuropeblog.blogspot.co.uk/2013/02/the-accounting-details-that-could-make.html

      “The accounting details that could make or break the EU budget”

      “European Council President Herman Van Rompuy may also choose to widen the gap between the ‘commitments’ and ‘payments’ headings of the EU budget in the proposal he will submit tomorrow – a move which could help facilitate a compromise. Van Rompuy has kept his cards very close to the chest on this one, so it’s difficult to say exactly how it’ll play out.”

      It’s not as if we could escape paying our share of the accumulated €218 billion by staying in the EU but instead we are being penalised for leaving; if we stayed in then when would have to pay this and more on top year after year.

  61. ian
    Posted August 5, 2016 at 5:01 pm | Permalink

    they are just taking the piss out of you and are letting them get away with it.

  62. Denis Cooper
    Posted August 5, 2016 at 5:02 pm | Permalink

    Off-topic, this is what one of our unelected legislators-for-life has to say, now that we have put her nose out of joint by voting to leave the EU:

    https://www.theguardian.com/commentisfree/2016/aug/05/peers-brakes-brexit-doing-our-job

    “If peers apply the brakes to Brexit, we’ll be doing our job”

    “The sovereignty of parliament must prevail. It is central to our democracy and needs to be nurtured. There are far too many examples around the world of what happens when too much power is vested in any individual.”

    (I’m not sure how an unelected legislator-for-life can even talk about “democracy”.)

    “Insistence on an act of parliament before article 50 is activated buys time.”

    “I hope that there would be a majority prepared to stall the bill through the one session of parliament that is possible before the Parliament Act can be invoked. This would be a break with the convention that the House of Lords does not stand in the way of a manifesto commitment. But when it was a manifesto commitment to plunge into the unknown, I for one am prepared to go against convention.”

    (So she implicitly admits here that not just holding an EU referendum, also but accepting the result as binding, was a manifesto commitment by her party.)

    This is the kind of thing she was saying before the referendum:

    http://www.standard.co.uk/business/patience-wheatcroft-reform-not-divorce-is-the-best-way-for-britain-in-europe-a3224626.html

    “Reform, not divorce, is the best way for Britain in Europe”

    So one protracted effort to persuade the EU to reform having failed miserably, she now wants to hold up our departure to allow another go at getting it to reform.

    What makes me a little bit cross here is that these Remoaners are praying in aid the sovereignty of Parliament when most them don’t give two hoots about the sovereignty of our Parliament, and some of them would very much like to see it destroyed.

  63. BOF
    Posted August 5, 2016 at 5:56 pm | Permalink

    Now that Dame Lowell Goddard has decided to head for home, will Mark Carney please consider following her example?

  64. fedupsoutherner
    Posted August 5, 2016 at 6:08 pm | Permalink

    On a completely different topic but just as important this was sent to me today.

    As I type, metered wind is generating 430MW (out of a metered capacity of around 9000MW) – supplying around 1.44% of UK demand – and Scotland is IMPORTING around 700MW from England.

    This problem will have to be confronted sooner or later and it will cost us mega!!

  65. ian
    Posted August 5, 2016 at 7:00 pm | Permalink

    Did you not know that there is USA election coming and every central bank is doing it bit to make sure the right person is elected.

    According to the BofA selling of USA shares by personal accounts holders down by 180% since 2008 and accelerated this year with institution at 100% from 2008 and hedge funds down 35%, so you may ask who has been doing the buying, uk based banks with us based banks country sovereign funds in the middle east and central banks the biggest buyer the switzerland up 50% this year with 8 billion last month, with DC now fiddling thr figures to make sure right person is elected and not for getting the bank you worked for, 250 billion in right hands can buy votes.

  66. Lee Moore
    Posted August 5, 2016 at 10:20 pm | Permalink

    I cannot understand why Mark Carney is playing this numbers game to be honest.
    He was “got-at” after the following article appeared in the media last year!!!
    In the Telegraph, on 22nd October 2015, it was cited that Mark Carney confirmed that, “Staying in the EU is the Risky Choice”
    This was during his session before the House of Commons Select Committee, he said that, “Remaining in the EU, dominated by the eurozone members, RISKS Britains stability”
    He went on to cite the “Five Presidents Report”, which would “accelerate this process”
    The Governor said, “the EU feels like it has ‘unfinished business’. He warned that as the Eurozone integrates further, the EU could take more control over key parts of the UK economy. This could make it more difficult for the Bank of England to do its job of protecting our economy from future crises.
    Since this report, he has made doom and gloom his forte, read it in full and the meeting is to be found somewhere on youtube in the parliament section!

  67. Roy Grainger
    Posted August 6, 2016 at 8:37 am | Permalink

    Did Carney really mention the commercial property fund situation as justification ? As I have mentioned before I am a big investor in these funds. There is no crisis and they are operating as intended, the open-ended funds have been closed for withdrawals and new investment in the past without the government resorting to QE and interest rate cuts. Just looking across all my property funds they are down son average 8% with no dividend cuts (so far) so hardly Armageddon. I think there is a debate to be had about forcing all property funds to be structured as closed-end (though the prices swings there were bigger) but it is a technical point.

  68. Lindsay McDougall
    Posted August 8, 2016 at 1:53 am | Permalink

    As I wrote, the Governor has produced a quack remedy for a problem (a Brexit induced recession) that doesn’t exist. There is no hard evidence of even a slowdown. Even if there was, we should weather it. The pick up will come when we actually leave the EU and Liam Fox’s free trade agreements come into force.

    The UK economy needs a relaxed monetary policy like it needs a hole in the head. Inflation is being deliberately created.

    Even worse, Philip Hammond has endorsed the Governor’s actions and promised a relaxation of fiscal policy if needed. This is utter nonsense. Just look at the ratio of the UK’s state debt to GDP – somewhere around 80% and still rising. He can’t reduce expenditure commitments easily in this financial year but he could increase fuel duty to reduce the annual deficit. Yes, it would reduce demand but so would any deficit reducing measure.

    It’s hard to avoid the conclusion that many of the top brass – including top Tories – on the Remain side of the EU referendum have refused to accept the result. We have been foolish not to purge the Augean stables of pro-Europeans.

  69. Malcolm Lidierth
    Posted August 10, 2016 at 2:04 am | Permalink

    Coordinated campaigns such as those of the Stronger In Group and the VoteLeaveWatch campaign of Chukka Ummana generate negativity presumably intended to influence a potential 2nd vote: whether that’s via a referendum or an election.

    That negativity is affecting businesses and the idea that it can not affect the markets requires that traders are purely rational creatures, which they are not.

    Yet an article by Ben Wright and in the Telegraph today suggests otherwise (posted online 9/8/2016 8:49PM, and presumably destined for the print edition of 10/8/2016).

    “But the idea that bitter Remoaners can “talk down the economy”, even if that’s what they wanted to do, is as absurd as it is pervasive. Try flipping the proposition around and you’ll see why: if we could talk ourselves into a recession then all we’d have to do is link arms and wish upon a star in order to get out again. ”

    The laws of physics are (largely) symmetrical. The human world is not. While machines make many trades on the LSE, investment decisions and strategy are still decided by humans.

    Wright says Remoaners are “not agitating for a second referendum or continued membership of the European Union; that horse has bolted, broken its forelock and is being turned into glue at the knacker’s yard.” It’s not obvious to me that this is true.

    A stand-up comedian might start a routine by locking nine economists in a room. The BoE does much the same to determine monetary policy. Sentiment among those economists, and their perception of market sentiment contributes to their decisions. Surveys look at business leader’s “confidence” for this reason.

    Negativity can contribute to a recession: the Remoaner’s are doing UK PLC a disservice and increasing the chance of a recession developing.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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