My immediate comments on the Bank of England decision, on Twitter and Linkedin
1 This decision by the Bank of England reflects appalling signalling by the Governor. His comments and by not correcting how the market or the media interpreted them led to hawkish expectations ahead of this meeting that was not merited by the recent data.
2. My view has been and still is that there needs to be a clear exit strategy from lax monetary policy. We should learn from the Fed to be on top of the data, to guide market expectations and to exit via tapering and not hiking rates. QE should have ended some time ago.
3. Interest rates are too low, at emergency levels. They need to be higher. But the economy does not need an ending & reversal of QE plus higher rates at the same time. QE should have ended some time ago and be reversed. The Bank’s signalling, timing and sequencing is all wrong.
4. Latest data shows US has lost momentum (but it could rebound in coming months), China is in a growth recession, oil prices are firm and a cost of living crisis may hit this winter. Yet monetary stability in terms of curbing inflation & financial stability warrants attention.
5. The media speculation was that the Bank of England would be the first major central bank to hike interest rates.
But in terms of how it signals, and interacts with the market, the Bank can no longer be considered a major central bank.
Is it now in the second division?
6. The U.K. is now witnessing significant self induced volatility in both interest rates and sterling and uncertainty about the likely exit strategy. With a loss of momentum and a cost of living squeeze the exit strategy may perhaps better copy the US path.