If the Monetary Policy Committee of the Bank of England wishes to be anything more than overpaid members of an academic seminar watching as the money markets go their own way, they need to cut interest rates tomorrow.
Market rates are almost 100 basis points or 1% above the MPC’s rate. Money policy is far too tight. The MPC is not in control of the markets.
If the MPC dithers and concentrates on the short term increases in prices, it will make the credit crunch worse. It will be as incompetent as the rest of the Brown government. House prices are falling, commercial property prices are falling, consumer confidence is falling. What more do they want? How much damage do they want to do?
Surely by now MPC members have learnt that changes in interest rates have an impact many months into the future. The inflation we are living with today is the result of keeping interest rates too low many months ago, and the consequence of ill considered banking regulations that encouraged off balance sheet excess. When will the regulators of the world revisit their folly, the Basel rules? When will they start to take some of the blame for the mess?
Today the credit crunch is the result of the unravelling of that mistaken banking regulatory model, and the result of interest rates that are too high.
The Bank of England, shorn of its old responsibilities to manage the public debt and to monitor the day by day balance sheets of the clearing banks, has lost its touch in the money markets. Gordon Brown’s botched “reforms” of the Bank of England did not make the Bank more independent, they made it less powerful.
IT IS VERY EASY : CUT RATES, CUT THEM BY AT LEAST 50 BASIS POINTS, CUT THEM NOW.