Yesterday saw another lamentable performance from the Bank of England.
Some see it as commendable humility and honesty to tell us on many occasions they do not know what will happen next.
It should lead instead to questions about why they employ so many highly paid economists and forecasters if they do not have a well informed opinion. Why issue forecasts at all, if you they are as wrong as the Bank’s have been in recent years, and if even the boss has little confidence in them?
The Bank wanted to get over two messages. One was the green shoots the market sees may not be robust. It may be worse than the Stock Exchange mood of last week. The second was monetary easing and ultra low interest rates carry on for the long haul.
These are both forecasts. I hope both are wrong. This economy needs more savings. That requires higher interest rates than the Bank’s guideline rate. This economy needs better control over inflation. That too requires a sense of monetary discipline.
In the real world people are getting a bit more for their savings than the usual margin over Bank base rate, and borrowers are having to pay a lot more than base. The market is ignoring the base rate in many cases. We are still experiencing the full impact of higher prices from the devaluation, and now face higher prices from commodity rises brought on by easy money worldwide.
What I wanted to hear yesterday from the Bank is how they intend to get from Quantitative Easing to a rational market? How are they going to withdraw all that extra liquidity before it is inflationary? Who is going to buy all the gilts they own, as well as all the gilts the government needs to sell?