Bank of England turns gloomy again and tightens money policy to depress demand

Last year the Bank slashed its forecasts for growth for the year after the Brexit vote and then had to push them up again. Growth accelerated in the six months after the vote against their expectations of a sharp fall. Today the Bank has decided to cut its growth forecasts a little from the upward revisions it made to 2017 at the same time.

The Bank made an important policy statement. What it has decided to do is to tighten monetary conditions despite its own view of sluggish growth. Indeed, it maybe because it is tightening money that it has to cut its forecasts. The tightening occurs in two stated ways. The Financial Policy Committee is reining in both mortgage loans and car loans, whilst issuing general warnings against more consumer debt. This reinforces the contractionary policies being pursued by the Treasury with its big tax hit to Buy to let and dearer properties through higher Stamp Duties made in the April 2016 budget, and its decision to cut back the number of dearer cars sold on the new car market through much higher VED on dearer vehicles. The Bank has also confirmed the end to its Term Lending Facility for commercial banks in February which will soon start to affect their behaviour, reining in credit.

The Bank has confirmed that “much of the weakness in housing market activity over the last eighteen months reflects a fall in the number of buy to let property transactions following introduction of the Stamp Duty change” and confirms that new housing for sale has been growing strongly, with starts up 26% on the year to Q1 2017. Capital investment has disappointed the Bank, though the shortfall is more noticeable in the public sector.

The Bank makes a great deal of the impact of Brexit, blaming Brexit for the fall in the exchange rate. Understanding that it needs to be consistent it has to explain why the Stock market has taken such a positive view since June 24 2016. It decides to say the market has risen because earnings and profits have been good. It then tries to suggest that this is down to sterling, whereas the FTSE 250 Index with more domestic companies and activity has also done well. The FTSE 100 is up 22% since June 24th, whilst the FTSE 250 is up 24%.

The Bank takes the fall in the pound from the pre vote high. The pound reached a 5 year high of $1.71 on 11 July 2014. It fell fairly consistently for 2 years to a low of $1.42 on 16 June, rallied briefly, and then fell away to today’s $1.32. Today’s level is 10% higher than the post vote low which the Bank does not mention. It is difficult to see why the Bank thinks all the fall since the vote is down to Brexit, but none of the rally is down to Brexit. It also leaves them having to explain what moved the pound down so much prior to the vote and why this influence ceased on the day of the vote. Remember quite a bit of the fall occurred long before we decide to have a vote, and then during a long period when markets were sure Remain would win. Much of the fall was about interest rate differentials at a time of rumoured or actual rate rises in the USA.

The Bank regards the rise in inflation as resulting from sterling, ignoring similar rises in inflation earlier this year in the USA, Germany and others owing to the higher oil price. UK shop prices were 0.3% lower in June 2017 than a year earlier, showing how lower sterling has been absorbed by importers and retailers.

The UK economy generated 324,000 extra jobs over the last year and now has 32 million people in work, with unemployment at 4.5%. the Bank accepts that there will be more good news on employment over the rest of the year. The Bank is being too gloomy again, but this time is tightening money so the economy may well be a bit slower as a result.

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86 Comments

  1. Anonymous
    Posted August 3, 2017 at 1:48 pm | Permalink

    It has nothing to do with a decade of QE and low interest then !

    • Hope
      Posted August 3, 2017 at 3:47 pm | Permalink

      Carney should have already walked for being too political and getting so many of his forecasts wrong. Is he being led by Hammond? Osborne was also wrong on all of his predictions, forecasts and pledges.

      It strikes me May is allowing and supporting scaremongering by remainiacs. Incredulously, as IDS points out, she has four vociferous envoy remainers in her negotiating team to leave the EU! These people on behalf of the EU will expect us to vote again until we make the choice they want. FFS, what is she thinking? This is deliberate not accidental.

      Your party needs to get a grip. Act on leaving the EU as the public voted. Those against this view step aside. After all collective responsibility requires the to do so if they do not agree with the policy. Why is Hammond and Rudd still ministers? The news should be on Corbyn’s U turn on student debts, his economic suicidal policies and mass immigration across the EU causing tension amongst countries.

      Instead your gob by remainiacs and Gove think they are changing our minds! It looks to me that your party wants another 22 years in opposition.

      • Hope
        Posted August 3, 2017 at 4:35 pm | Permalink

        JR ten years with no interest rate rise. Why should prudent hard working people who strive to improve and not live in debt or handouts vote for your party?

        Your party believes in fecklessly wasting money and goes overboard to support those who have greedy eyes beyond their purse. I have had enough of your party wasting my taxes on overseas aid, when wanting to rob me of my house and savings to provide care that I already paid for in tax and NI, over 300 tax rises since your party came to office, raided everyone’s pensions other than MPs, we note the change to CPI for teachers, police, nurses and fire officers but RPI remains for you lot. The same is true with pay rises etc,£77,000 for an unqualified part time job plus benefits.
        Your leader May lies that your party is low tax, etc even when Hammond is trying to work it into the self employed. At what point do you think you think all support will collapse?

    • rose
      Posted August 3, 2017 at 5:56 pm | Permalink

      Just what I was going to say.

  2. hans chr iversen
    Posted August 3, 2017 at 2:03 pm | Permalink

    John,

    You have written a very good analysis of the present state of the economy and the reasons why, you do not believe Brexit is to blame for the increased inflation as this has been absorbed by the importers and the market. It is very true that a significant amount has been absorbed by the market and importers, but it still does not explain, why inflation in the UK is running at twice the average rate in Europe.

    The falling pound and the increased value of the EURO due to growth rates which are twice of Britain in the first six months of the year, should also be taken into consideration, for why we have higher inflation at 2.7%.

    Reply Domestic energy prices and Council taxes are bigger factors unique to UK

    • hefner
      Posted August 3, 2017 at 3:27 pm | Permalink

      Re to Re: Any little bit of research on the web will show that Germans pay (even) dearer for their energy than the British people. As for local taxes, for example, Germans pay to their Lander, and the French have to pay Taxe d’habitation, taxe fonciere, taxe de consommation sur les produits energetiques (TIPCE).
      If you don’t know what to reply, do not b***s***. Just keep quiet, at least you will not look ridiculous. Before 1997 and html 3.2, such a behaviour was easy, not anymore when everybody with a search engine can find when the Right Hon. is rather economical with the truth. Bad.

      Reply Germany subsidises energy for industry

      • hefner
        Posted August 3, 2017 at 10:04 pm | Permalink

        What prevents the UK government from doing the same for its industry? Some (40-year old and counting) ideological blocking?

    • hans chr iversen
      Posted August 3, 2017 at 5:01 pm | Permalink

      John, sorry I am not sure I understand that reply fully?

      • libertarian
        Posted August 5, 2017 at 4:14 pm | Permalink

        what he’s telling you Hans is that theres more things going on in the domestic market than thinking about Brexit.

        Seeing as 86% of UK business does NO business whatsoever with EU then things like , business rates, energy costs, workplace pensions etc etc etc all have a bigger impact

        Any one with the first idea about running a business would know this

    • Anonymous
      Posted August 3, 2017 at 7:35 pm | Permalink

      We’ve had a decade of QE and low interest rates. This is why the pound is weak.

      Brexit is a convenient scapegoat.

    • Lifelogic
      Posted August 4, 2017 at 4:53 am | Permalink

      Also Hammond’s large increases in Insurance Premium Tax to 12%. The increased minumum wage rate also destroys jobs, export jobs and increase inflation significantly. As usual the main problem is the bloated and misguided state sector and misguided government. This and their absurd waste on HS2, green lunacy, electric car subsidies, HS2, Hinkley and the rest. It the absurd Swansea Lagoon project dead yet?

  3. ian
    Posted August 3, 2017 at 2:54 pm | Permalink

    There a lot of politician that are relying on project fear to come true, so they can show the people, that coming out of eu is a bad move. BOE and the treasury are now moving to bring down economic growth to make it come true. Don’t you just like politics, great game, with yourselves in the middle looking on, as the blows come in knocking you off your feet. Seems funny to do away with bank facilities if you think growth slowing down, So he taking away bank facilities so he can bring them back later on, so the media can make a big deal about it and make stories about doom& gloom.
    See usa is starting a trade war with china sanction on russia, so maybe they come to the end of road of growth this time round, and is all kicking off together. Is that what central bank do, all work together.

  4. Richard1
    Posted August 3, 2017 at 3:02 pm | Permalink

    I think it’s time for Mr Carney to move on, perhaps returning to Canada where hopefully he could replace the rather overrated Mr Trudeau as PM (assuming theres no chance of the very sensible Stephen Harper coming back). Mr Carney is too much identified with Remain and seems constantly to be trying to prove himself right.

    • hans chr iversen
      Posted August 3, 2017 at 6:23 pm | Permalink

      Richardt, jusut for a moment assume he might be half right that wold put your comments in another context or what do you think or do you have a better explanation on the falling purchasing power for all of us?

      • Richard1
        Posted August 4, 2017 at 10:12 am | Permalink

        It is true that sterling has fallen since the Brexit vote, but as JR points out much of the fall happened pre the vote, and some of it is due to the BoEs own policies, designed to save us from the anticipated effects of its own erroneous forecasts. To me it looks like Mr Carney is having trouble accepting that he has turned out to be wrong about the Brexit vote, and seeks ways to emphasise problems. For someone in his position that is dangerous for the rest of us. We need a neutral and dispassionate figure as BoE governor.

        • hans christian ivers
          Posted August 7, 2017 at 9:54 am | Permalink

          Reply. The ECB has had an even more expansive QE and there currency has not suffered a 20% depreciation, so I am afraid I am not quite able to follow your argument that this is Carney’s own mistakes?

    • Lifelogic
      Posted August 4, 2017 at 4:57 am | Permalink

      Carney should have been fired for his absurd bias during the referendum. Anyone chosen by the economic illiterate Osborne was almost bound to be totally misguided. He is very expensive too and should go now and take his “green blob” wife with him.

      • hans christian ivers
        Posted August 7, 2017 at 9:59 am | Permalink

        I am sorry I find the comments about the wife totally off the record and disagree with you as we are now experiencing financially what was anticipated, falling purchasing power and falling consumer spending year on year at 0.9% july to July

  5. Nig l
    Posted August 3, 2017 at 3:07 pm | Permalink

    Yesterday, good news on the housing front, a high percentage of older people would be prepared to downsize freeing up larger properties for larger families, something I have heard politicians suggest as part of the solution to our housing problems. The bad news is that the stamp duty greed of the Treasury has put off a lot of them from doing it and a massive shortage of smaller homes with the necessary support facilities around, due to a lack of planning from HMG means they have nowhere to downsize to. The Bank didn’t mention this and no doubt their comments about private sector growth will be seized as a sign of success. There is still plenty of evidence (Treasury versus the rest?) of a lack of foresight and joined up thinking.

    • rose
      Posted August 3, 2017 at 10:11 pm | Permalink

      The other bad news is that low interest rates encourage old people to buy houses to let, as they don’t get any interest on their hard earned savings, thus joining those low interest rates in driving up house prices.

  6. WalterM
    Posted August 3, 2017 at 3:20 pm | Permalink

    The bank has to act in a v.careful manner, especially not knowing which way these brexit talks are going and with effective leadership from the UK government being non-existent at the moment under Mrs May (still can’t understand how the PM could take off on hols at a time like this?). And then we have this awful Trump situation in america- i think we will all have to be careful in these precarious times- call it gloom and gloom if you like.

    The punters on the stock markets will be forever there but even they can get it wrong – as happened in the past?

    • Sir Tantea
      Posted August 4, 2017 at 1:27 am | Permalink

      WalterM
      ” i think we will all have to be careful in these precarious times- call it gloom and gloom if you like.”
      They are not precarious times at least to me. They are exciting times. Personally , I find it insane, no a genuinely mental aberration, that anyone of a mind which has equilibrium should find continued membership of the EU (27 other nation-states ) each with five-yearly elections where absolutely anything can pop up and in the past in Europe has..and violently… “Certainty” and leaving such a bubbling cauldron of politics and economics “UNcertainty” . Wow that is weird!!!!

  7. Gary C
    Posted August 3, 2017 at 3:50 pm | Permalink

    ‘warnings against more consumer debt.’

    Really, ironic when the ultra low interest rates have contributed so much to increasing consumer debt.

    (How do I put a roll eyes emoticon on here ?)

  8. John
    Posted August 3, 2017 at 3:55 pm | Permalink

    More project fear from Carney. He also moaned about productivity without delving into it suggesting that was also to do with Brexit. That’s been on a downward trajectory for ages and to do with uncontrolled immigration from low wage countries. Taking advantage of our tax free £11,500 Personal Allowance and minimum wage and going home to eastern Europe to spend it there by us not receiving any tax revenue and the productivity chain goes elsewhere. Their productivity is looking great. Carney doesn’t mention this.

    • Pastures Green
      Posted August 4, 2017 at 1:10 am | Permalink

      Nor does he explain exactly how he calculates productivity. JR did a good article/blog on such calculations some time ago but I have forgotten what he wrote.
      Anyway, productivity and growth in Germany is looking great as predicted after the German housebuilders had to build quick semi- pre-made housing. This would show up as as a giant G for growth. In truth it just made homeless people specially shipped in better off at the expense of the German economy. Most of them still have no work. In productivity-terms as we lay-people understand it,Germany is not succeeeding but sinking like a stone. I hear too she is building more coal-fired power stations and extending the ones in use. “or many tens of thousands of Germans would be made unemployed.” Didn’t his happen in our coalmining areas and in the US Rust Belt? So that will be more growth and productivity for Germany. Their Green agenda has oil and coaldust on it.

    • hans christian ivers
      Posted August 7, 2017 at 10:04 am | Permalink

      Reply the majority of the eastern European working in this country like the majority of EU citizens are paying Vat, NI and income tax and providing for the continued growth in the UK. The productivity issue goes back decades and we only have our selves to blame for that(bad educational levels compared to most of north western Europe)

  9. Chris
    Posted August 3, 2017 at 4:16 pm | Permalink

    Mark Carney should be replaced.

    • Effigy
      Posted August 4, 2017 at 12:57 am | Permalink

      Unfortunately John Laurie who played the undertaker in Dad’s Army with the famous catch-phrase “We’re doomed” has passed away so cannot replace him. We should snap a full sized photo of Mr Carney and stick it to an upright cardboard background. No-one will know.

    • Posted August 4, 2017 at 9:39 am | Permalink

      I’d like to see wikileaks (or some other sneaky body) produce a list of payments he gets for using his position to broadcast this nonsense.

  10. Tabulazero
    Posted August 3, 2017 at 4:17 pm | Permalink

    Out of topic:

    Excellent article from Simon Kuper in the FT today. The gauntlet is down. Will you pick it up, Mr Redwood ?

    REply I havent read it. What is the argument

    • Tabulazero
      Posted August 3, 2017 at 9:53 pm | Permalink

      You know he does not share your view of Brexit.

      According to him, Brexit reveals three enduring flaws in Britain’s working. 1. A preference to run the country on rhetorics. 2. U.K.’s ruling class insularity. 3. Delusions of grandeur.

      He concludes that all the above would not be very important had the lead Brexiters not been tasked with implementing Brexit. He sums up his view as saying that the current handling of Brexit is akin to asking the winner of a debating contest to design a spacecraft.

      • Richard1
        Posted August 4, 2017 at 10:19 am | Permalink

        Sounds a straw man argument. Is it not just as rhetorical to be in favour of EU membership with its requirement – and the reality – of ever closer union? If he’s a strong supporter of the EU Simon Kuper should be arguing that we should join the euro enthusiastically, that it’s great we have agricutural protectionism, unlimited immigration from EU countries, and send £10bn pa in aid to countries like France etc etc. I have no problem with people being pro EU, I agree it’s a balanced argument. But why can’t Remain supporters like mr Kuper have the courage of their convictions and support the EUs actual policies and direction rather than put up nonsense arguments such as anyone who opposes the EU is harking back to the Empire?

      • libertarian
        Posted August 5, 2017 at 4:19 pm | Permalink

        Sorry

        I dont know Simon Kuper, what business did he found and run? What skin in the game does he have?

        Just googled him, he’s a sports journalist…. so he must an expert… Tell you what rather than keep spouting this pap why not give a positive business based debate on why a protectionist customs union is a better proposition for a global trading nation …. no thought not

    • hefner
      Posted August 4, 2017 at 8:27 am | Permalink

      T, thanks for pointing this out. Some roundabout vs. traffic light bashers might even recognise themselves?

  11. Caterpillar
    Posted August 3, 2017 at 4:33 pm | Permalink

    Dr Redwood, Why does the Govt continue to have confidence in the bank?

    We have had desperate AD facing monetary policy for more than a typical business cycle with the ensuing increase in personal debt, reducing savings rate, no productivity growth etc. The policy has been consistently poor/ damaging / divisive and yet it continues to trap itself with these ‘it wasn’t me’ type excuses.

    Please could you clarify a route that the BoE could follow to escape the trap of its current policies?

  12. Man of Kent
    Posted August 3, 2017 at 4:35 pm | Permalink

    I should be amazed that the Bank seems not to take into account that the value of sterling falls as we print more money .

    But I am not !

    We are still printing money at a rate of some £60 billion a year thanks to the BOE and Hammond – and this is just to keep current expenditure going .
    This is a helluva headwind to overcome with increased GDP and productivity .

    They should be wondering how we have done so well to increase the value of sterling from $1.20 to $1.32 recently ; but no comment .

    This Government of National Depression badly needs to change personnel .

    • hans chr iversen
      Posted August 3, 2017 at 6:25 pm | Permalink

      the reason for the increase in pounds to dollars is teh fall in dollars it ahs nothing to do with the overall value of the Pound, or do you have a different explanation?

  13. ian
    Posted August 3, 2017 at 4:46 pm | Permalink

    He just doing his job, as instructed by who ever, that is, stimulus when you don’t need it, like last year after the ref vote, and taking stimulus away this year when you do need it. Can’t wait for the budget in nov this year, treasury and the chancellor must be in overdrive mode with that one by now.

  14. JoeBr
    Posted August 3, 2017 at 4:47 pm | Permalink

    The problem is that there is too much uncertainty about. The government could remedy this if it got on with the exit talks and let business and the people know and so that a new trade agreement could be established. We voted for brexit ie. to leave the single but we didn’t vote for this confusion.

    To heap all of the blame on the BoE as you seem to be doing is not the way forward, mr Carney has already signalled that he is leaving the job and returning to Canada in a year or two so he has no personal axe to grind in all of this, he is just being straight up and honest with everyone about our prospects and deserves to be listened to.

    • I told you I was ill
      Posted August 4, 2017 at 2:09 am | Permalink

      “The problem is that there is too much uncertainty about” Sounds like the late Spike Milligan’s ” There’s A Lot Of It About” . Just as silly too. Mr Carney said yesterday that Companies are scaling back on investment here because of “uncertainty”. Yes, he is correct there are indecisive business people. The clever ones, as everywhere in the world this magic “uncertainty” exists, profit by the stupidity and indecisiveness of such commercial opponents. They will here too. By the time they open their wallets, it will be too late for them. So the clock is ticking for namby-pamby business people. The Americans are more strident as is their custom, as is their President. Hoorah!!!

  15. Sacker of the Yard
    Posted August 3, 2017 at 4:52 pm | Permalink

    The BoE lost credibility on 23rd-24th June 2016. For any financial institution to get it so spectacularly wrong would create uncertainty. The BoE created and continues to create uncertainty. If it is deliberate then accusations of currency manipulation could be levelled against the UK by other countries. Dang no! When will he resign? He should go after Mrs May comes back from holiday along with the Chancellor. They should have gone months ago. As useful as earrings to a whale.

    • hans chr iversen
      Posted August 3, 2017 at 6:27 pm | Permalink

      So, whom are you suggesting should replace them to get out of the mess we are in now and for teh foreseeable future while the rest of Europe is growing?

      • Roy Grainger
        Posted August 3, 2017 at 8:35 pm | Permalink

        UK is growing too though you wouldn’t believe it from Carney’s gloomy announcements.

      • Mess Tin
        Posted August 4, 2017 at 1:48 am | Permalink

        Get us out of what mess? It is EU citizens who are coming here and crying because they think we may stop them coming to live here. Why would they wish to live in a mess? Are you suggesting they are stupid? Are you suggesting they wish their kids tio live in a mess? Why is the Labour Party insisting they should live in this mess? Have they no heart? Have they no moral compass? Why are the half a million Labour Party members not contributing a Pound per week to enable the EU citizens to return home out of this mess? Out of this terrible cliff-hanging uncertainty?

      • libertarian
        Posted August 5, 2017 at 4:22 pm | Permalink

        Hows the EU’s unemployment coming along, below 50% youth unemployed yet Hans?

        Hmm if you had a brain you’d have to wonder why so many people at great danger cross the whole of the EU to get to live and work in the UK

        Boy you folks have got some great brains running your outfit…not

        • hefner
          Posted August 11, 2017 at 5:55 pm | Permalink

          From statista.com “Youth unemployment in the EU” (as of May’17):
          Euro area 18.9%, EU 16.9% and this is made of:
          46.6 Greece
          38.6 Spain
          37.0 Italy
          28.4 Croatia
          24.8 Cyprus
          24.6 Portugal
          21.6 France
          21.5 Belgium
          20.4 Finland
          19.9 Romania
          18.6 Slovakia
          18.3 Estonia
          17.6 Luxemburg
          17.4 Sweden
          14.1 Poland
          13.7 Latvia
          12.6 Bulgaria
          12.5 Lithuania
          12.3 UK
          11.7 Eire
          11.1 Denmark
          10.9 Hungary
          10.6 Malta
          10.5 Slovenia
          10.1 Austria
          9.2 Czech Rep.
          9.0 Netherlands
          6.7 Germany

  16. ian wragg
    Posted August 3, 2017 at 4:54 pm | Permalink

    Carney is still following the advice of Gideon and the EU. Brexit is to blame for everything including the sacking of Scarramuchi by Donald.
    It’s time he was sacked and someone with the UKs interests was appointed. No doubt he and Hammond regularly share a tipple.

  17. Dolly
    Posted August 3, 2017 at 5:18 pm | Permalink

    Carney, Hammond, and Gove taking it in turns to frighten regular ordinary and straightforward people that they will lose their car, home, livelihood, job, and ultimately their family is a cowardly attack and hardly coincidentally . They appear the pretenders to the Triumvirate of Despair [( ToD ) two stone of sheep hair.)]

  18. Duncan
    Posted August 3, 2017 at 5:35 pm | Permalink

    After Gove’s volte face on Danish fishing rights in UK waters (following our withdrawal from the EU) today I do indeed smell a Brexit betrayal in the air

    If May does betray democracy and the sovereignty of my country the Tories will pay a heavy, heavy price at the next GE

    I have been a Tory voter all my life and I have put my faith and trust in this party to do the right thing and uphold the result of the EU referendum. To do otherwise would be very unwise indeed and May and the Tories will never be forgiven for such an act of appalling treachery

    • Garretg
      Posted August 3, 2017 at 7:12 pm | Permalink

      Duncan.. Gove is only pretending that we had fishing rights out to 200 miles..prior to 1973 and for hundreds of years before our limits extended out to 12 miles only so its all a nonsense to suppose that we can stop danish fishermen from fishing up to 12 miles from our coast. I suppose he is putting that story out there as some kind of tactical ploy to muddy the waters

    • Roy Grainger
      Posted August 3, 2017 at 8:41 pm | Permalink

      Gove’s policy announcement on Denmark is curious in many ways. For a start we are supposed to be negotiating with Barnier not offering concessions to individual EU states. For another this we won’t be able to negotiate a bilateral fishing agreement with Denmark anyway as that is within the remit of the EU, so Gove can’t claim Danish fishermen will have plenty of access to U.K. waters as it up to the EU to decide how any quota they negotiate gets split between EU countries. Hard to know what Gove is up to – a bit of divide and rule to split the EU ?

    • Broadside
      Posted August 4, 2017 at 12:45 am | Permalink

      I gather Gove said we do not enough capacity to trawl and process the fish just now. If that is what he said then he was telling the truth. We can’t conjure up boats, crews, process workers , truck drivers and warehouse staff. . The workers were made redundant and took u pother employment. Many are now retired altogether. It will take years to recover. The Remoaners dropped a bomb on our fishermen, their families and communities and many lost their homes.

      • rose
        Posted August 4, 2017 at 8:15 pm | Permalink

        We should let the fish recover rather than giving them back to the EU. When our fishing fleet has recovered, and we have a border force working, then we might find it time to start serious national fishing again.

  19. Andrew
    Posted August 3, 2017 at 5:41 pm | Permalink

    Not sure the lemmings who voted Brexit and whose standard of living is hurting will understand or even care about your analysis. Their shopping is more expensive and their wage rises are lower. That’s all they know. The anger will mount.

    • Roy Grainger
      Posted August 3, 2017 at 8:46 pm | Permalink

      It seems to be a characteristic of Remainers that they prefer insult over argument. It lessens their case. Still waiting for those 500,000 post vote job losses incidentally.

    • Posted August 4, 2017 at 3:11 am | Permalink

      So, ”Andrew”, the lemmings are more concerned about their standard of living than about the freedom of their country? At least some of us are a little less narrow minded than that. We put sovereignty first, and any loss to our pockets is a small price to pay for freedom.

      • R.T.G.
        Posted August 4, 2017 at 4:22 pm | Permalink

        Indeed, LJ, I tried to quantify “freedom”, and one computation was that losing 10% of wealth would be an excellent bargain, as it would, more or less, equate to the savings gained by having the freedom not to take European holidays for the rest of my life!

    • anon
      Posted August 5, 2017 at 4:55 pm | Permalink

      More supply at lower prices will come on stream from suppliers who no longer face EU import tariff’s.

      Until we are out we are currently held in limbo by EU laws and anti-democrats.
      Anti democrats who wish to thwart a direct democratic referendum.

      We need to move on, unilaterally and exit the EU early.

      The honest remainer parties can run on a manifesto to rejoin and lose.

  20. ian
    Posted August 3, 2017 at 6:00 pm | Permalink

    Mr Carney said that uk financial sector to double in size with in 25 years if rules are not water down after brexit happens, and to be 20 times the size of GDP in this country, talk about all your eggs, the other day, all in one basket, how would you bail that lot out. Nice, can’t wait. HS 10 hear we come.

  21. BarryD
    Posted August 3, 2017 at 6:49 pm | Permalink

    Michael Gove when asked about the succes or otherwise of the brexit talks said that everything would work out good provided we make the right decisions. So Gove should be sent over to brussels to represent us instead of david davis..he could bring iain duncan smith with him. Smith knows all about the the bavarian car workers…jeez

  22. formula57
    Posted August 3, 2017 at 6:52 pm | Permalink

    Your analysis (cogent as ever) is suggestive to me of the view that the Bank of England does not know what it is doing – and the problem with that is that it is likely true.

    I see that Société Générale’s Albert Edwards (the equity strategist of the bearish outlook) is quoted as saying very recently: –

    “The UK has also only sustained moderate GDP growth via a total collapse in the S[avings] R[ate] to unprecedented historical lows, but also relative to the levels of the credit crazy US. The BoE recently warned of a spiral of complacency about mounting consumer debt. But, of course, there is no acknowledgment of its own pernicious role in this unfolding disaster.”

    Mr. Carney’s machinations might deliver us out of Mrs. May’s hands and into Mr. Corbyn’s. What then for Brexit?

  23. mickc
    Posted August 3, 2017 at 7:13 pm | Permalink

    The Bank, like its “star” Governor and most other “experts” doesn’t know its ass from its elbow. All such experts seek to justify their own errors.

    • hans chr iversen
      Posted August 4, 2017 at 5:20 am | Permalink

      So, please kindly give us your prediction of what the economy is going to look like going forward?

      • libertarian
        Posted August 5, 2017 at 4:25 pm | Permalink

        hans

        here you go…. I’ll back this prediction with big money too

        The economy will grow a little, contract a little, have a boom, have a bust , the pound will go up the pound will go down , just like it always has and always will. Economies are cyclical and driven by speculators

  24. MikeW
    Posted August 3, 2017 at 7:36 pm | Permalink

    Growth is down, inflation is up, wages are stagnant now so consumer spending is way down and Mrs May is on holidays- am i missing something?

    Put it another way.. dear old Boris is doing Liam fox’s job out in australia, liam is probably on August break and Michael Gove is holding the fort.

    Or it could be Hammond holding the fort who is now oabout to take his summer break and D Davis will return fresh to the fray ready for the next round of brussels talks in a few weeks- can’t wait. Dreadful report on the econokic outlook today

    And it’s all the BoE’s fault .. that scheming Carney..who tell’s it like it is- can’t abide people who talk straight

    • Bob
      Posted August 4, 2017 at 7:54 am | Permalink

      “people who talk straight”

      if only !

  25. Les
    Posted August 3, 2017 at 8:03 pm | Permalink

    The palpable Brexit confirmation basis regularly trotted out by Carney is predictable and now embarrassing.

    His gloomy anlalysis of the Brexit future when his forecasts have been regularly revised unfortunately means he is clearly straying into politics rather than sticking to economics.

    However, Mrs May may have concluded that Carney’s positions of influence as Chair of FSB, for example, offer some compensatory benefits for the Brexit process.

    Either way June 2019 can’t come soon enough.

    • hans chr iversen
      Posted August 4, 2017 at 5:21 am | Permalink

      Please, then kindly give us your prediction of what the economy is going to loo like going forward?

      • Beecee
        Posted August 4, 2017 at 1:21 pm | Permalink

        I assume Les was going to check the Pine cones before he replied but found they had all been taken by Economists!

    • Bob
      Posted August 4, 2017 at 8:05 am | Permalink

      ” Carney’s positions of influence as Chair of FSB”

      For a moment I thought you were referring to the Federation of Small Businesses. That would have explained much about their flippant attitude to the people they pretend to represent.

  26. Sir Joe Soap
    Posted August 3, 2017 at 9:43 pm | Permalink

    Our legacy from the 70s was an asymmetrically high interest rate as compared with both other European countries and the US. This went on through the 80s and 90s. Nobody had the confidence in Sterling for it to remain strong without the prop of high interest rates. That prop disappeared under Brown, and went into reverse with the QE machine. Osborne & Cameron continued the QE show. For a while this propped up the economy and currency but since 2014 the forces of nature have resumed and Sterling has been hit. Mainly a result of low interest rates, previous QE but then project fear prior to the vote didn’t help either. Why constantly talk your employer country down, as the BOE Governor? Whether or not the UK can “manage” as well outside the EU as in, to frighten the flock by saying we can’t is just madness. Rather like a General going into battle and telling his soldiers to surrender before they start to fight because, despite being better prepared, and having a history of winning against the odds, they’re outnumbered!

    This kind of motivation we don’t need here in the UK. Send him back to Canada where he can be gloomy about the outlook for that country and its natural resources, which are bound to run out eventually, its housing market, which is in a terrible bubble, and it’s reliance on and subservience to the USA, which will eventually subsume it! Disaster awaits!

  27. Bryan Harris
    Posted August 4, 2017 at 6:27 am | Permalink

    #

    It does seem that we have more traitors than we actually need, all willing to do our country in ….

    As Parliament does have the role of monitoring what the BoE does, perhaps they can be taken to task on the misinformation they provide.

  28. Beecee
    Posted August 4, 2017 at 7:47 am | Permalink

    The naturally consequential fall in the value of the pound will no doubt be listed in their next revue as caused by Brexit doubts!

  29. A.Sedgwick
    Posted August 4, 2017 at 8:55 am | Permalink

    Does the BoE have any use anymore? Its interest rate and QE policies are highly questionable since 2008, but that assumes they are not financial puppets dancing to the Government/Treasury tunes.

  30. Epikouros
    Posted August 4, 2017 at 9:37 am | Permalink

    Central banks are the chief influence on the direction that assets and currencies take as they command interest rates and money supply. When their policies are loose (i.e low interest rates and money introduced into the banking system higher than demand) money flows into assets and hence they inflate. The spill over is that economic activity increases and improves growth rate and demand for labour. That activity and as you point out the interest rate set by other Central banks affects the demand for the currency. One the growth rate high the other the interest rate lower than is available that other Central banks have set then the currency will fall. Certainly sentiment can effect the currency levels from which we see swings up or down but they are short lived and do not effect overall trends.

    The economy therefore is being managed artificially and not where it should be managed by the mutual interaction and exchange of producers and consumers. Central bank management is driven not by any sense of the true knowledge and understanding that market places possess but by the very fallible and error prone human mind. It is all suck it and see and hope the brakes work at the right moment to avoid the numerous dangers lurking ahead. Inevitably the brakes are applied at the wrong time and busts or at least recessions occur of far greater intensity than if the market place was the driver of the economy and not the Central bank. No doubt this time will be no different as the central banks have as usual set themselves and by consequence us for another fail.

  31. Dennis
    Posted August 4, 2017 at 3:12 pm | Permalink

    More employment/work -who primarily pays for this? The ecosphere.

    Aside from cancer, tobacco is good for the economy.

  32. MikeP
    Posted August 4, 2017 at 9:05 pm | Permalink

    Given the Bank is “independent” why is it not fitting for a Government spokesman, you perhaps, maybe not Luz Truss in her new Treasury role, or the Chancellor even (!), to give the sort of riposte that you have given. It seems that the Government is happy to let bad news fester or doom-mongering to linger without challenge. That is very unhealthy given the challenges ahead.

  33. fedupsoutherner
    Posted August 4, 2017 at 9:11 pm | Permalink

    Are the powers that be making a hash of the economy and therefore lives of many to get us to vote against Brexit when the ‘2nd referendum’ comes around?? If they can make things financially as bad as possible they may get people to vote ‘correctly’ this time.

  34. Jack
    Posted August 4, 2017 at 9:30 pm | Permalink

    Brexit itself will not cause a collapse. But it will not cause a boom *per se* either. That said, we are at risk here of an economic collapse.

    The whole foundation of the economy is based on spending. As the issuer of the currency, only the UK government can control the amount of spending in the economy. Commercial banks can create money but the government has ultimate control via capital requirements etc.

    If the govt, of which the BoE is part, does not want banks lending large amounts for whatever reason, it must pick up the slack with increased deficit spending or face economic stagnation (or possibly worse).

    The UK government’s debt is far, far too small. This desire to reduce it is based on a misunderstanding of the monetary system. The UK government’s debt is not what you would normally consider debt, it is best viewed as the total net financial assets (net money) in the economy.

    The government’s debt is our wealth! Can we get some gigantic payroll tax cuts to increase the deficit to at least 12% of GDP, which is badly needed right now?

    • Jack
      Posted August 4, 2017 at 9:39 pm | Permalink

      Sorry to have to keep repeating certain things, but JR never seems to provide true answers because he still has the same economic thinking as the EU elite.

      The rest of the Brexiteers think that free trade will save us, even though the benefits of comparative advantage only exist if both countries have full employment economies. In many ways the anger in this country will only build further as the promised prosperity never materialises and we get overtaken in GDP per capita PPP terms by China.

      None of them have learned from the Chinese experience of massive deficit spending / state bank lending, and GDP growth of 15% per year.

      Reply There is no early prospect of China overtaking us in income per head! I do not think free trade saves us. The bulk of our living standards will continue after Brexit as before to be delivered by selling things to each other within the domestic economy. I also look forward to more import substitution from domestic sources.

      • Jack
        Posted August 5, 2017 at 9:51 am | Permalink

        Import substitution from domestic sources will probably mildly boost GDP, and might make us more self-sufficient as a country, but what benefit will the average person notice?

        Imports are real benefits and it should be the government’s objective to maximise imports per unit of exports. Likewise, exports are real costs to the economy, it’s output we don’t get to consume ourselves.

        If you really want to get massive support behind Brexit, then boost people’s income by increasing government deficit spending. Provide enough aggregate demand for full employment, set the BoE Bank Rate at 0% forever to eliminate the most common source of inflationary pressure (interest costs), and aim to maintain at least 10% GDP growth year-on-year by adjusting the deficit (money creation) as required.

  35. Lindsay McDougall
    Posted August 4, 2017 at 11:56 pm | Permalink

    Does base rate have to go to MINUS 0.25% before you acknowledge that monetary policy is too loose?

    Brexit hasn’t happened yet. What has happened is that the fall in sterling and the accelerating rate of inflation both have the same cause – too much money sloshing around. We need to start raising base rate with the specific objective of reducing house prices RELATIVE to wages and salaries. If house prices stay constant in nominal terms and wages rise, this can be achieved without the misery of widespread negative equity.

    It goes without saying that if we had starting raising base rate three years ago we would be in much better shape now. The trouble with Tory Wets is that they believe their own propaganda.

    The odds are that we are at the start of stagflation. Growth is slowing down and inflation is going up. The one month reduction in the inflation rate has been a one off. All this is nothing to do with Brexit.

  36. lojolondon
    Posted August 5, 2017 at 6:43 am | Permalink

    John, sorry to say that I think this is very little to do with ‘the Bank’ and everything to do with George Osborne’s friend from Goldman Sachs. It would be hard to imagine the British economy having a worse friend in this key position. I strongly believe that he has failed in his mission and he should clearly go.

    • hans chr iversen
      Posted August 5, 2017 at 3:19 pm | Permalink

      Reply: John, please kindly explain the response about energy prices and council tax being particularly important for UK inflation being higher? thank you

      Reply Self explanatory

    • hans chr iversen
      Posted August 5, 2017 at 3:22 pm | Permalink

      lojolondon

      Are you sure one man can do all this harm or is it maybe, because we had a vote/referendum where we are promised a lot but we just ended up in trouble because we did not actually know what we voted on?

      • libertarian
        Posted August 5, 2017 at 4:27 pm | Permalink

        hans

        You may not know what you voted on but the 17.2 million who voted out know exactly what we voted for…… Leaving the EU , single market and customs union

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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