Interest rates

The Bank of England is independent when it comes to forecasting inflation and the economy. It has the sole right to fix the Base rate, the crucial short term interest rate that affects the returns of savers and the costs of borrowers,

All the time I was an MP I respected their Base rate power and did not advise on changes. I was critical of their forecasts of inflation when they were obviously wrong.

Now I can write and speak as I like about interest rates. The European Central Bank and the US Fed made similar mistakes to the Bank of England delivering inflations several times target level in 2022. The Japanese, Swiss and Chinese Central Banks did not make the same mistakes and their inflation  stayed low, showing the inflation was not the result of lockdowns and the Ukraine war.

Over the last year the ECB has followed a better policy to correct past mistakes than the Bank of England. This week they rightly cut interest rates recognising sluggish growth and tight money and credit. The Bank of England should do the same.

The Bank will probably hold rates claiming it should not move them in an election period. That implies it suspends its own independence. The Bank needs to be seen to be independent on rates. Otherwise not cutting them now will be seen as pro Labour and cutting them now seen as pro Conservative . I think most people do believe the Bank is the independent setter of rates and I have not seen any Conservative government pressures on the Bank over rates.

The U.K. economy has been badly slowed by the Bank’s very tough money policy 2023-4. Inflation will come down as a result. The Bank should cut,especially given its obstinate refusal to change its very damaging policy of over the top bond sales.

81 Comments

  1. Bloke
    June 8, 2024

    A Bank of England that operates sensibly and properly would be a pleasant change.

    Reply
    1. PeteB
      June 8, 2024

      Spot on. The real damage to the UK (& World) economy was done by holding base rates around zero for the best part of 10 years.

      In the words of Walter Bagehot (1852) “John Bull can stand a great deal, but he cannot stand two per cent .” It was this period of free money that caused many of our current problems.

      Reply
      1. jerry
        June 8, 2024

        @PeterB; Except our host wants a lower base rates, even now the BoE base rate is not exactly very high right, compared to when they were a lot higher back in the 1970s and 1980s – are some people forgetting?

        Reply
        1. Lynn Atkinson
          June 8, 2024

          No I remember Major putting the rate up to 17% – it was that day of the highest suicides in the U.K.

          Reply
        2. PeteB
          June 8, 2024

          Agree Jerry. Bank rates stayed at 5% for around 100 years from the early 1700’s. They were never below 2% until 2009. The 70’s and 80’s were exceptional for high rates which were as dangerous as low rates.

          Let the markets set the price. There’s independence.

          Reply
          1. A-tracy
            June 8, 2024

            Interest Rate in the United Kingdom averaged 7.09 percent from 1971 until 2024, reaching an all time high of 17.00 percent in November of 1979 and a record low of 0.10 percent in March of 2020. Trading Economics

            Over the last 100 years, the average is around 8.3%. Property Beacon

    2. Everhopeful
      June 8, 2024

      Trouble is it is woke, woke, woke!
      How do you cure woke?
      You have to go broke!
      Not a pleasant prospect for all concerned.

      Although a certain person (nearly) managed it I believe.

      Reply
      1. Original Richard
        June 8, 2024

        Everhopeful :

        It’s not “Go woke, go broke” its “Go woke TO go broke”

        Reply
        1. Everhopeful
          June 8, 2024

          Nope.
          You are wrong.
          It is a political slogan.
          “Go Woke, Go Broke” Forbes
          But what is a “to” between friends?

          Reply
          1. Original Richard
            June 8, 2024

            Everhopeful :

            There’s a big difference. It’s all to do with the intended outcome of going woke.

            For the fifth column Communists who take control of a company and then make it go woke to go broke the intention IS to destroy the company. It is not just an unfortunate, unintended consequence.

    3. Ian Wraggg
      June 8, 2024

      The BoE tales it’s lead from Brussels and the WEF
      It doesn’t operate in the interests of the UK and the committee is stuffed with left wing academics much like the rest of the Quangos.

      Reply
      1. Donna
        June 8, 2024

        And the IMF.

        It’s certainly not run in the interests of the British economy, let alone British citizens.

        Reply
        1. Lifelogic
          June 8, 2024

          +1 not is it likely to be run competently if they keep appointing dire, woke, pushers of net zero lunacy like Carney and Bailey. Bailey was a total disaster at the FCA too.

          Reply
        2. Hope
          June 8, 2024

          JR’s party could and should have changed All Gordon Brown’s policies, they chose not to but add another extreme left wing quango called OBR! You do not stuff the establishment full with left wing quangos and expect conservatism!

          Come on, no one rated Brown who raided our empty pockets for every penny of tax including pensions and inheritance tax when we died! When he became PM was loathed like Treacherous May. Unelectable. Cameron used him used him, like other former Labour ministers for Scottish vote! No surprise Sunak loathed the same. The man who claims to be good at maths, with a short career in banking and wants everyone to study Maths loses £12 billion to school boy errors, states all youngsters do national service, to follow EU countries, but leaves D Day early for a vanity interview! Gave away N.Ireland to force EU lock step against our national vote. Currently encouraging mass immigration from India. No thanks.

          Reply
      2. Radar
        June 8, 2024

        Ian W, Bank for International Settlements (BIS) probably stick their oar in too.

        R

        Reply
      3. Lifelogic
        June 8, 2024

        +1

        Reply
      4. Timaction
        June 8, 2024

        Indeed. 14 years to change the left wing quangos, Councils, emergency services, Home Office, Foreign office, Treasury, OBR, etc. Total Tory failure to address woke. In fact added to it with ESG/ DEI and non Equality Laws, 192 Company’s Act. Still, Farage wiped the floor with the other 6 fools in the leadership debate, despite the loaded lefty audience clapping like seals everything woke and
        lefty. Does the BBC/Ofcom think we don’t notice?

        Reply
        1. Berkshire Alan
          June 8, 2024

          The BBC chooses the Company that chooses the audience, enough said !

          Reply
    4. Lifelogic
      June 8, 2024

      A state sector and government that operated sensibly and properly would be a pleasant change.

      Mark Carney and Andrew Bailey have both been total disasters, full of net zero drivel and other woke lunacies.

      The BoE were granted operational independence over monetary policy on 6 May 1997 by Gordon Brown/Blair responsibilities to include financial stability and regulating firms such as banks and insurers. This was also a disaster. About the same time as he wrecked private pensions and sold out gold at the bottom of the market.

      Reply
  2. R.Grange
    June 8, 2024

    When interest rates are kept high, it slows down the economy. When the economy slows down, inflation usually falls. Now inflation has fallen, the PM can say he’s redeemed one of his five pledges. That’s why interest rates were kept high. It’s a victory for politics over economics.

    Reply
    1. Mike Wilson
      June 8, 2024

      Interest rates are not high. Debt is.

      Reply
      1. Lynn Atkinson
        June 8, 2024

        Especially State debt.

        Reply
  3. Sakara Gold
    June 8, 2024

    Sir John has repeatedly drawm attention to the poor productivity in the sate sector.

    Ways must be found to extract greater productivity from the state services that escaped privatisation under the Thatcher/Major regimes. It is easy to criticise without proposing solutions, so here are four ideas which could be considered

    1) The NHS has a headcount of 1.3 million. There are about 133,000 doctors and consultants and roughly
    350,000 nurses and 35,000 managers. Which leaves 784000 admin people. Why so many? I suggest that the NHS could lose 150,000 admin people without anybody noticing, let alone the patients. Losing 200,000 could probably pay for another couple of hospitals

    2) AI should be rapidly introduced into the civil service. The civil service suffers from empire building, resulting in a great deal of duplication. Many roles up to quite senior grades could be replaced by AI robots

    3) QUANGO’s get to spend about a quarter of government income. I have repeatedly posted here that they are a waste of money, a radical solution would be to set a target of a reduction in QUANGO costs of 50% by ruthlessly eliminating the more useless ones over the next parliament

    4) Public sector pensions (amother 25% of government expenditure) are a ticking timebomb. We can no longer afford the luxury of paying retired civil servants taxpayer funded non-contributory index-linked final salary pensions

    Reply
    1. agricola
      June 8, 2024

      One more wise suggestion and you will be voting reform.

      Reply
      1. Hope
        June 8, 2024

        Well said SG.

        We were promised some of this in 2010, 2015, 2017, 2019, Francis Maude was going to sort civil service, Landsley was going to sort NHS with his reforms, council tax freeze, Cameron promised the bonfire of quangos and no one to be paid more than the PM. The opposite happened, same with promises to cut immigration when they actively sought mass immigration, promised to balance the structural deficit by 2015 and pay down the debt- Sunak promised this again recently!

        Hands up who believes Tory promises?

        Reply
        1. jerry
          June 8, 2024

          @Hope; We have had such promised since at least 1979, probably the early ’70s and before, but on closer inspection it has often been found that the proposed changes were at best no better, and sometimes a far worse solution than how things were being done already, perhaps because of unforeseen (legal) consequences,

          For example, the only way of implementing a policy of “no one to be paid more than the PM” would likely mean having to increase the PM’s salary to match the highest civil service pay grade. Cutting civil service pay will either mean a strike or mass resignations, why work in the Whitehall area for peanuts when the City and Canary Warf are just down the road, and the same commute! Some of the most Woke, most costly, policy mistakes have been those carried out for the sake of change, without proper oversight.

          Reply
      2. Hat man
        June 8, 2024

        +1 😀

        Reply
    2. The Prangwizard
      June 8, 2024

      And also why 35,000 managers? The whole system is overmanaged, down to individual departments. Trouble is no-one dare tackle the issue in any way. Does any politician talk about it regularly, relentlessly.

      Who daily looks for and publishes the waste found, not keeping it general but naming names?

      Reply
      1. Lynn Atkinson
        June 8, 2024

        Funny thing is that the NHS managers can’t manage and there are HUGE and vast quantity of contracts with PW and other management consultants to manage the NHS.
        Perhaps some MP in the next Parliament could find out how many contracts there are, many are 5 years long, what the contracts cost and why they are nescessary?

        Reply
    3. Dave Andrews
      June 8, 2024

      They need loads of admin staff to cover all the legislation, covering themselves against clinical negligence claims, employment tribunal claims and government data collection, anything but the work of making people better. Mind you there would be far fewer people they need to treat if they didn’t have to treat lifestyle diseases.

      Reply
    4. jerry
      June 8, 2024

      @SG, The most ironic moment in last nights ‘Leaders’ slanging match was surely when Mr Farage suggest the UK adopts an EU/French model for our health service, had we remained in the EU that, or the German model, is most likely what we would have ended up with!

      No, the UK just needs to fund our health service properly, just as Boris and his bus promise an extra £350m for the NHS every week…

      Reply
      1. Lynn Atkinson
        June 8, 2024

        If they could only have confined the increase to £350m a week… but alas the NHS demands ALL THE MONEY and then some – and gets it.

        Reply
        1. jerry
          June 9, 2024

          @LA; That promise was on-top of whatever was already being spent (pre Covid) on the NHS. If you think the French, Germany, and especially the US taxpayer spends less on healthcare than we do in the UK you are misinformed, yes the tax take might be less but the overall hit on their disposable income is as high or higher. If two people are paid the same salary, one then pays £100 in tax to the NHS, the other pays £100 to a private health insurer, who is left with the more money to spend on cups of designer coffee?

          Reply
      2. Berkshire Alan
        June 8, 2024

        Jerry the NHS is already consuming more than the entire Income tax take, it just needs to be managed properly by competent people.

        Reply
    5. Lifelogic
      June 8, 2024

      1.3 million employees so that is about 30 hours a year per person. I doubt is in my lifetime I have has as much as 30 hours of personal attention from NHS employees in my circa 60 years. What are all these people doing? Har to even get 5 minutes with a GP.

      It seems Kier Starmers wife is a Lawyer working for the NHS doubtless paid far more than most of the doctors. I do not know what she does but many lawyers there are employed to resist the vast numbers of negligences claims often very valid ones. Rather like lawyers acting for the post office in that scandal.

      If she does that sort of work she surely will know what a dreadfully inefficient organisation it is. The Covid Vaccine scandal is an error about 30 times as bad as the Contaminated Blood one. The list of NHS scandals is vast even just the main ones.

      Reply
    6. Lifelogic
      June 8, 2024

      Tax rises “hiding in plain sight” will raise £23 billion a year for the government by the end of the next parliament regardless of which party wins the forthcoming election, new research has found.

      In the Times today.

      Reply
    7. Mike Wilson
      June 8, 2024

      Surely public sector pensions are contributory.

      Reply
      1. Lifelogic
        June 8, 2024

        Yes but they contribute very little for the pension they receive circa 25% or less very often.

        Reply
      2. Berkshire Alan
        June 8, 2024

        Mike certainly the NHS is, but the benefits are completely out of proportion to the personal cost.

        Not sure what the actual cost is now, but when a family member was working in the NHS, the taxpayer was funding 18% of the employees salary each year as employer contributions to their pension.
        I am not aware of any Commercial organisation funding that amount for its employees..

        Reply
  4. Sakara Gold
    June 8, 2024

    To the relief of many, today we read that the UNITE union refuses to endorse Labour’s election manifesto. Starmer must have got something right

    Reply
    1. Ian Wraggg
      June 8, 2024

      Yes, they object to shutting down the North Sea fields and Importing all our electricity at to the detriment of uk workers

      Reply
      1. Sakara Gold
        June 8, 2024

        @Ian Wraggg

        Nobody is proposing to shut down the remaining N Sea oil and gas fields. As they naturally empty, they will be replaced by windfarms.

        In the 2023/24 winter heating season, power generated by wind, hydro and solar reached 55TWh, 10TWh more than the 45TWh’s generated by gas power stations across the UK. 55TWh is an absolutely phenomenal amount of juice. This saved us from having to import at least 25 tanker loads of extremely expensive LNG

        We are exporting as much electricity to the EU as we import. Check it out in the middle of the night, when UK renewable electricity is charging up French and German EV’s

        Reply
        1. Lynn Atkinson
          June 8, 2024

          They don’t ‘naturally empty’ and the Green Party IS proposing shutting the oil and gas fields down.

          Reply
      2. Lifelogic
        June 8, 2024

        Very sensible of them.

        Reply
    2. Everhopeful
      June 8, 2024

      You left out this bit (Telegraph) “It’s what Russians would call the ‘systemic opposition’ – a bit of window dressing to create the illusion of legitimate debate.”
      Apparently Labour is still accepting huge cheques from its main donor.
      So no real fallout there then?

      Reply
      1. jerry
        June 8, 2024

        @EH; No doubt the Star, that is the Morning, not the Daily, is reporting the entire Labour Manifesto as a sell-out. Take your pick as to what propaganda you believe, some of us though will wait until we can read such documents for ourselves…

        Reply
        1. Everhopeful
          June 8, 2024

          I admire your infinite patience. Both for waiting and reading!
          But surely we can speculate around the subject?

          Reply
    3. Lifelogic
      June 8, 2024

      No Unite got something right. The net zero agenda is total lunacy and pointless, job destroying economic suicide.

      Reply
      1. Lynn Atkinson
        June 8, 2024

        Funny to the the ‘green’ SNP having to promote Maintaining the Scottish oil a gas fields and be full on Net Zero in the same sentence! 🤡

        Reply
    4. mickc
      June 8, 2024

      The purpose of Trade Unions is to look after the interests of their members. Unite, of which I am a member, is doing exactly that by not backing a Manifesto with which it disagrees. That is a principled stand with which I also agree. The political sphere would be better served if those involved followed that example…and stood by their principles. For example, had the Conservative party actually been Conservative rather than Cameron LibDem it, and the country, would be in a much better position than is currently the case.
      I will be voting Reform in the Election and hope the Conservative party as presently constituted is brought back to actually be Conservative, when I may re-join.

      Reply
  5. Peter Wood
    June 8, 2024

    Good Morning,
    Do not official Base Rates simply reflect the real cost of money?
    Real cost of money is a function of money supply, (look at yields on government debt) and that is surely a result of Treasury and Bank working together, pushing up supply, which reduces cost, and reducing supply that increases cost. Independence…. a fiction.

    Reply
    1. formula57
      June 8, 2024

      No! How could you think that?

      Central banks have a long history of rigging interest rates so if anythiing they reflect the preferences from time to time of those banks.

      Reply
    2. Lynn Atkinson
      June 8, 2024

      You have forgotten all about ‘demand’. If demand goes through the floor then there is oversupply even if the numbers in circulation are small.
      Crushing demand is a very bad idea.

      Reply
  6. agricola
    June 8, 2024

    Perhaps we have reserve team economists working at the Bank of England. Maybe they suffer Pilot Induced Errors (PIOs), they through nervousness and unfamiliarity make errors which are continuously over corrected, leading to a very erratic flightpath.

    I look upon the Bond Market as a wheeze for creating money the government has no entitlement to. It is for spending on projects that do not withstand value analysis, such as HS2 or ones that delve into areas of government incompetence to conceive or manage. I have in mind the now defunct NHS data base and the Post Office accounting program. Even the minister in charge claims complete unawareness of what went on during his watch.

    The relationship between government and the BoE is inevitably, son in law mother in law, in nature. A question of who does right by the bride/ economy, leading to failure on both sides. Our economy is begining to show positive signs despite the atrophied lumberings of the BoE and government, indicating that the players are learning to duck and dive in the minefield created for them. As previously stated, it is not my field, I just see and experience the results.

    Last night’s slanging match was revealing. Penny was coherent if a bit political on the economic front. Labour was out of its depth. The three very minor parties were in LaLa land. The Lib /Dem said anything to please. Nigel was precise, accurate and very self controlled in what was an unedifying bear pit. It does not bode well for the next five years.

    Reply
  7. DOM
    June 8, 2024

    Inflation is an act of politics.

    Reply
  8. jerry
    June 8, 2024

    The first assumption is that the BoE is actually independent of course. Any logical argument will accept, as the BoE is owned by the State, it only has notional independence at best, in the same way as BL or BR were never independent of govt interference, and as the NHS and Post Office still are, their Chairmen always beholden to a Minister or two, when things go well the the Minister takes the credit, when the fan gets messy its all the fault of others!

    There is nothing that defines when or how interest rates are used to control economic problems, how else can one explain interest rates during the height of the ERM crisis (17% at one point?), and during the height of the UK banking crisis of 2008-on (0.25% at one point). Interests rates are but one tool of many.

    If the BoE cut rates, our host will be happy, but savers will no doubt bleat, whilst first-time buyers might still not be able to afford a mortgage, should property bubble inflate.

    Reply
    1. Lifelogic
      June 8, 2024

      Any organisation that feel the need to claim they are “independent” almost invariably is not. Who funds them & who appoints them?

      Reply
    2. formula57
      June 8, 2024

      @ jerry “There is nothing that defines when or how interest rates are used to control economic problems,” – beyond the nature of the crisis perhaps. The action sought during the ERM crisis included inducing market participants to buy Sterling, hence interest rates were raised to imrpove the attractiveness of holding Sterling and raise the cost of shorting it. The action sought during the 2008 and on banking crisis was to help replace lost demand through a downward repricing of risk through savage interest rate cuts to induce asset price inflation.

      Reply
  9. Sakara Gold
    June 8, 2024

    I do enjoy a good televised election debate. The one organised by the BBC last night had the major parties deploying their reserves, much like Gareth Southgate’s England team that lost 0-1 to Iceland. Only three party leaders deigned to attend, Nigel Farage for Reform and Rhun ap Iorwerth for Plaid Cymru. Niether said anything of note. The Greens fielded a co-leader

    Generally speaking, if two people debating an issue resort to shouting each other down, they have clearly lost the argument. At one point I thought that Penny Morduant was going to smack Angela Rayner in the kisser. Rayner, who was wearing a fetching crimson number, alleged that Sunak’s £2000 Labour tax rise was a lie; last night’s moderator Mishal Husain confirmed that it had been criticised by the UK statistics watchdog

    Green co-leader Carla Denyer impressed. She observed, after a particularly loud exchange between Morduant and Rayner, how unedifying it was. 10/10 for effort

    Reply
    1. Dave Andrews
      June 8, 2024

      I found the ranting of the Plaid Cymru twit unbearable, so switched off after about half an hour. That was long enough to identify the BBC had stuffed the audience with a pro-immigration mob. I resent the narrative that anyone opposing unlimited immigration must be a racist.

      Reply
    2. Lifelogic
      June 8, 2024

      “criticised by the UK statistics watchdog”. what are this organisation doing about the many statistics that show the vaccines did very significant net harm? Are they conspiring to hide these like much of the rest of government amd Mr Unequivocally Safe?

      You were impressed by Carla Denyer really? Making a pigs ear of Bristol. The greens even have an open border forcmigrants agenda. A policy of taking in so many that eventually the UK will become so unappealing that it is as bad as the places they are coming from and then they will stop. Great plan the Green loons. How high will the population be for this? 500 million + perhaps should go well and be popular.

      Reply
    3. IanT
      June 8, 2024

      The Green Pixie presented herself well I thought SG and is obviously a canny lass – but more in what she didn’t say than what she did.

      When the debate moved to Defence, she forgot to mention that the Green Party’s policy is to get rid of our nuclear arsenal. Her idea of folk saving on their energy bills (by insulating their homes and installing heat pumps) ignors the fact that there might never be financial return on the investment. When she was talking about homes for the young, she didn’t mention that she favours rent controls. How did that go last time that it was tried? Whilst there will be “thousands of green jobs”, she won’t sell weapons to any country “that goes to war” (good bye defence industry). Nor did I hear her mention that we should only buy stuff from countries that treat their workers well (another Green policy). Well there goes all our carbon free imports (and EVs) from China. We should also welcome the world’s refugees here too of course – it’s the Kind thing to do.

      How do we pay for all this kindness? Well, Tax all those Multi-Millionares and Billionaires more of course. Isn’t is obvious? The “Rich” will pick up the bill (e.g. not us). It didn’t seem to occur to her that the Rich might not like this idea and just leave. So dig just a little deeper into her ideas SG and you quickly find simplistic, naive policies. The kind of thing that any Sixth Form could produce at the drop of a hat but with very little practical sense behind it.

      Reply
    4. Lifelogic
      June 8, 2024

      All the people other than Farage and perhaps the woke Mordaunt seemed totally mad to me. Mordaunt did the best she could but given the Tories record of 14 years lies and abject failure had no chance. Everything Farage said was well expressed, sensible and correct.

      So now we get a Tory promise to scrap stamp duty for up to £425k properties. Is this all or first time buyers only? Who cares as A. they have zero chance of being in power and B. they never deliver on their promises anyway. We have not even had the £1M IHT threshold yet promised by Cameron and Osborne circa 16 years back. Still £325k now worth more like £200k. Any promises are too late now Sunak and totally worthless.

      Reply
    5. Donna
      June 8, 2024

      You couldn’t have been watching the same debate as me.

      Nigel won it hands-down. Mordaunt did fairly well when you consider the appalling cards she was holding, not least Sunak’s disgraceful departure from the D-Day Commemorations.

      I have no idea whether Rayner looked in the mirror before going on but she looked and sounded like a trans-woman and demonstrated that she has difficulty stringing a dozen coherent words together.

      The SNP and Plaid spokesmen shouldn’t have been there since they are irrelevant to 85% of the population …. it’s a GENERAL ELECTION.

      And the Green woman spoke with the gravitas and sense of a brainwashed student.

      Reply
    6. Lifelogic
      June 8, 2024

      In the Times today:- Tax rises “hiding in plain sight” will raise £23 billion a year for the government by the end of the next parliament regardless of which party wins the forthcoming election, new research has found.

      The trouble is tax rate rises, from the current, absurdly overtaxed position will probably raise less tax net of costs not more. VAT on school fees and the attack on Non Doms certainly will.

      Still time for the unequivocally foolish liar, pusher of net zero lunacy, fan of open door immigration and ever higher taxes Sunak to fall on his sword. Just to limit the damage a bit. Or is destruction of the Tories his actual aim?

      Reply
      1. jerry
        June 8, 2024

        @LL; Yes, tax cuts for one always mean taxes rise for others, not always direct taxation; after all a doubling of VAT clearly affects those with less disposable incomes. For a millionaire, paying double the previous VAT rate on a non discretionary purchase is nothing but a nuance, and off-set by their tax income tax cuts in any case, but for someone on a minimum wage job or on a fixed pension it might well be the cost of their next meal, or being to worried to put some coal on the fire, and then the price of their door-step milk doubled…

        Thank goodness for the Militant Tendency!… You might need to think about that one.

        Reply
    7. jerry
      June 8, 2024

      @SG; “[Rayner] alleged that Sunak’s £2000 Labour tax rise was a lie; last night’s moderator Mishal Husain confirmed that it had been criticised by the UK statistics watchdog”

      Many independent analysts are reporting that the calculator at CCHQ must have a sticking + button, as they appear to be counting one sum of money multiple times, to get to that £2000 figure!

      Reply
    8. Timaction
      June 8, 2024

      Wow, you watched a different version of the debate to the common national agreement that Farage excelled with facts and logic and the rest were either bickering children or fools, witnessed by …. the Country.

      Reply
      1. jerry
        June 8, 2024

        @Timaction; Those serving free beer are always popular…

        Reply
  10. Everhopeful
    June 8, 2024

    Labour has my e mail and my address.
    ( At this point they are soooo charming!)
    They seem very interested in donations and say that the tories are pouring money into this election and that if Labour does not get contributions it will lose.Odd?
    Seems to me that the Unison donations are super generous..well power is expensive I suppose.
    So for goodness sake tories….keep pouring!

    Reply
    1. jerry
      June 8, 2024

      @EH; It might be best not to bring up party political donations, never mind where they come from, for some reason CCHQ are currently a bit shy on the subject apparently… Now what was our host talking about, oh yes Base Rates. 😐

      Reply
    2. Lynn Atkinson
      June 8, 2024

      It is well known that they fund their party through the term by what can be raised at election time. Certainly the Tories in every Constituency I have ever worked in did that.

      Reply
  11. Original Richard
    June 8, 2024

    “The Bank should cut,especially given its obstinate refusal to change its very damaging policy of over the top bond sales.”

    Just as Net Zero isn’t intended to work with insufficient chaotically intermittent energy, no means to store electricity, the inadequate capacity of national and local grids and expensive, impractical electrical devices, so the BoE’s models and hence policies are also not intended to work but simply to destroy.

    As Marxism wasn’t seen to be working in the USSR and hence unattractive to workers in the West, the Marxists realised that they could not create the conditions for a revolution in the West and planned instead their “long march through the institutions” based upon the doctrines of the Italian Communist Gramsci.

    So you can be sure that whether it’s the DESNZ or the BoE the plan is to destroy the West’s wealth and economies to start the necessary revolution.

    Reply
  12. Mark B
    June 8, 2024

    Good morning.

    I am not buying this independence stuff. Not saying what you have written is incorrect or untrue Sir John, but my take is that the BoE does not seem to act either in isolation from ALL external actors and / or for the UK. As stated numerous times, its focus is inflation. Problem is, its method of controlling inflation, interest rates, is really rather limited in its impact and the whole economic arsenal that the State has is scattered hither and thither resulting in little coordination and benefit.

    For example. Interest rates will only affect those who have borrowing and / or savings. It will have no effect on those with neither. It will not curb their spending which is causes demand which in turn contribute to inflation. There is also money printing or, as I prefer to call it, debasement of the currency. To me it is no better than those of old who use to file to edges of gold and silver coins. It damages the value of that which is in your purse. But we all know why it is done and that governments do it to destroy their own debt. It is theft of the people wealth, simple as, and is a no less a crime in my view.

    The Swiss value their currency. That is why people like to leave a store of wealth in it, much like gold.

    Reply
    1. Sir Joe Soap
      June 8, 2024

      Gut feeling says current rates about right. The £ isn’t spectacularly strong. The housing market seems fairly balanced. Companies shouldn’t be borrowing at the low rates of the past just so they can run in zombie mode against assets constantly increasing in value. We shouldn’t be encouraging the behaviour of Thames Water and other borrow-to-asset-strip outfits. Savers should be rewarded for holding cash in a risk laden still inflationary environment.
      5-5.5% seems about right until the £ and inflation have stabilised for 12-18 months at least.

      Reply
    2. formula57
      June 8, 2024

      @ Mark B ” Interest rates will only affect those who have borrowing and / or savings. It will have no effect on those with neither.” – for those with neither, “the pound in their pocket will not be affected” is the phraseology to employ perhaps?

      Reply
      1. Lynn Atkinson
        June 8, 2024

        🤣😂 I’m sure the people with no borrowing or savings will be fine – both of them!

        Reply
  13. Derek Henry
    June 8, 2024

    Increase cost of Credit just gets passed onto the consumer as higher prices. Then you have the interest income channels, the bigger the debt to GDP ratio the larger the effect. The more gilt edged savings certificates the public hold the bigger the fiscal stimulus in interest payments.

    All entirely voluntarily. If we stopped selling Gilts and paying interest on reserves tomorrow everything would continue as before. As it used to before the Maastricht Treaty. Before the treaty we used the Ways and means account as the balancing item instead of issuing gilts.

    That should have been one of the first things we did with Brexit. The treaty should never have been allowed the assault it persued on our monetary system.

    Rachel Reeves appealed to the dubious authority of the Institute of Financial Studies:
    They said that the way to tackle that risk was to sell more long gilts, in other words: use a longer term, lower cost borrowing approach that would have protected public money more from sudden spikes in interest rates.

    Griffiths countered:

    The Institute for Fiscal Studies report referenced in Labour’s analysis, calls for more index-linked gilts.

    It was like watching two bald men fighting over a comb.

    The correct “longer term, lower cost borrowing approach that would have protected against sudden spikes in interest rates” would be to use the Ways and Means account at the Bank of England and stop issuing Gilts altogether.

    The ‘government borrowing rate’ would then drop to the Bank Rate. The Bank’s profit would return to HM Treasury as the Bank Dividend, reducing the cost further. British mortgage and rent payers would no doubt agree.

    The Bank has missed its inflation target 107 times in the last 180 months. How much longer before we accept changing the base rate doesn’t work?

    If a pension fund relies upon index-linked gilts to cover its liabilities, how is it anything other than state-backed? As part of the auto-enrollment process, they receive automatic pension contributions, a privatised hypothecated tax. It is only notionally voluntary.

    Wouldn’t it be more cost-effective to cut out the middleman? Stop issuing gilts, use the Ways and means account and just issue granny bonds to DOMESTIC households.

    It could offer a savings product at National Savings with a variable interest rate.

    It could offer a £100 savings bond at National Savings with a fixed interest rate and a fixed term.

    It could offer a £100 treasury gilt at the Debt Management Office with a fixed interest rate and a fixed term.

    Note how the last two items are the same, showing that there is no need for the Debt Management Office. National Savings could do it all.

    If pension funds had used National Savings rather than gilts, they wouldn’t have had a problem. Now we know how to fix government borrowing costs.If National Savings issues a bond at 2%, then 2% is all anybody will get. Nobody can make the government pay more than it wants to. What we used to do before Maastricht.

    Scrap the full funding rule, which is a left over from the gold standard and fixed exchange rates.

    Maastricht intention of course was to bypass Westminster and the democratic control of the elected parliament, which is seen as getting in the way of the spending aspirations of certain political groupings.

    This is the direction of travel of current monetary policy thinking – towards further abuse of the central bank’s purchasing capability. We are seeing that in the current shift away from purchasing government bonds, to purchasing corporate bonds. Before too long the central bank will be bailing out other private sector assets. It’s hardly surprising, then, that some wiley political types want to get in on the act by dreaming up other assets the central bank could ‘QE’ without having to obtain a vote in parliament first.

    Gilts are nothing more than tradeable welfare payments, and welfare payments should be democratically targeted not market purchasable. National Savings annuities, where an individual can build up an annual additional pension by purchasing ‘Granny Bonds’ directly. Would be the solution.They would have limited residual capital value and no capital uplift, but they would give a secure additional income in retirement for ordinary people who decide to be thrifty and save. The precise level and nature of the instruments is open to debate.

    I’d suggest and have been saying For nearly 20 years now. Granny bonds For British households only, would be linked to index of retail prices For cost of living purposes. Plus a 5 % bonus if held For 5 years. Free from all income tax and capital gains tax as tax doesn’t fund anything anyway.

    For smaller operations and service businesses without the sort of ‘hard asset’ collateral banks require, the government could provide £50K of overdraft insurance to the banks, much as they are doing at present with the Business Interruption Loans.

    Foreign holders of Sterling hold that money for neo-mercantile purposes due to a belief in ‘export-led growth’. These foreign holders of sterling need to spend it, invest it properly, or be left, once again, with the default investment of a Sterling deposit in a bank. There is no reason why the UK household should be propping up capital values in the Norwegian Global Pension Fund (or any other foreign pension fund or central bank) with public interest payments.

    A reduction in gilts means an increase in cash and reserves, and therefore less need for repos and other collateralised transactions. Instead, go back to using real things as the basis for collateral and discount them into money, which is what banks are supposed to do for a living.

    If banks have got so soft that they can’t price properly off zero, then it’s time to let the market sort them out and produce banks that can price off zero properly. If that means a few banks have to go to the wall, so be it. You wanted capitalism – that’s how it works.

    Reply
  14. Bert+Young
    June 8, 2024

    Not being able to speak your own mind at any time is a mistake . Voters must always rely on honesty and straightforwardness . Sir John’s judgement on the BoE’s performance has been correct and he deserved more support from his own Party in the past .

    Reply
  15. mickc
    June 8, 2024

    I don’t understand why JR felt unable to comment a base rate decisions. Surely it is the job of MPs to point out when a power exercisable by a State institution is mistakenly used?

    Reply
  16. formula57
    June 8, 2024

    Certainly “The Bank should cut..” although of course fiscal and direct meassures in tandem are desirable.

    There might be a forlorn general expectation amongst the public that rate cuts will take rates back down to the artificially low levels seen during the Bernanke experiment. Aside from fuelling another round of asset price inflation, such an outcome would restore difficulties in pricing risk, with consequent risk of sub-optimal investment decisions.

    Reply

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