Wednesday, Aug 19, 2009
Hey, whats's a few Billion here or there (Manjana, manjana)
BBC: Bank split over money injection
The Governor of the Bank of England, Mervyn King, wanted to pump more money into the UK economy this month but was outvoted by fellow policymakers. Minutes of the bank's Monetary Policy Committee (MPC) meeting on 6 August reveal that Mr King wanted £75bn rather than the £50bn that was injected. Two fellow committee members also voted for a bigger cash injection. The decision to pump £50bn came as a surprise, and was already twice the £25bn that the market expected.
Posted by jack c @ 12:55 PM (1692 views) Add Comment
22 Comments
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1. uncle tom said...
Maybe our Merv realised that they wouldn't be able to stop at £175bn, and that setting the cap at £200bn would make a nice round number..
..they could then start incrementing in £100bn tranches..!
2. mrflibble said...
Quantitative Easing is just like Pringle's, once you pop you just can't stop!
I quite fancy a nice new shiny 50" Plasma, can I now Xerox my own twenties of do I have to wait for Merv's to filter through? ;-)
3. refusetobuy said...
Choice cuts from
http://www.bankofengland.co.uk/publications/minutes/mpc/pdf/2009/mpc0908.pdf
Spreads between government bond yields and OIS rates had fallen markedly since the beginning of the year. This was in contrast to the United States and euro area, where central banks’ purchases of government bonds had been smaller relative to the size of the outstanding stock. That suggested that the MPC’s asset purchases had played a part in reducing gilt yields relative to where they might otherwise have been
Survey indicators were encouraging. But they were measures of the change in output rather than its level, and it was not altogether surprising that output growth had begun to recover after the precipitous fall in activity that had occurred around the turn of the year. The level of output remained well below its previous peak. Furthermore, there was significant doubt over the extent to which the recovery would be sustained
Employment had not declined by as much as might have been expected given the falls in output
There were some factors that could hold back any further recovery in household spending. Credit supply was tight and highly indebted households might seek to reduce their debts by increasing saving. Expectations of a higher future tax burden, given the fiscal consolidation that would be necessary in the years ahead, and continued uncertainty about job prospects were also likely to lead to higher levels of saving.
Base effects from movements in petrol prices a year earlier, and the scheduled reversal of last year’s VAT reduction would probably mean that inflation
would rise back up again around the turn of the year.
The measure of expectations of inflation five to ten years into the future was unchanged on the month. Similarly, forward measures of inflation derived from financial market prices had not moved significantly on the month.
The Committee judged that the probability of activity contracting for a further sustained period had fallen
In the projection for CPI inflation conditioned on Bank Rate held constant at 0.5%, and a stock of purchased assets held in the APF of £175 billion, the risks of inflation being above or below the 2% target at the two-year horizon were broadly balanced, albeit that the path of inflation was rising
4. Chris said...
1. uncle tom said...
Maybe our Merv realised that they wouldn't be able to stop at £175bn, and that setting the cap at £200bn would make a nice round number..
..they could then start incrementing in £100bn tranches..!
Wednesday, August 19, 2009 01:16PM
Since the QE money appears to be being used to buy UK government debt I would imagine Mervyn knows damn well that 175 billion isn't enough as UK government borrowing will need to be around 500 billion over the next few years. The banks are sitting on trillions of pounds of dodgy assets that they could swap for this money to buy government debt so this could go on for some time.
5. refusetobuy said...
Basically a lot of inflationary data coming in. Nothing there to suggest a reversal of the previous months hold decision.
The only thing that justifies further QE is that their model tells them too.
Their model hasn't worked before (if it did we wouldn't be in this mess), so why should it work now?
6. 51ck-6-51x said...
The minutes
"""
30. There were arguments in favour of a considerable expansion of the programme at this month’s meeting. The potential adverse consequences of adding another large monetary stimulus might be less severe than the possible costs of acting too cautiously. Insufficiently stimulatory monetary policy would cause inflation to remain below the target for a sustained period of time, depressing inflation expectations, and might harm public confidence in the recovery causing it to falter. Confidence in the efficacy of monetary policy might also be damaged, limiting policymakers’ ability to stimulate the economy in future. In addition, if it became apparent that monetary policy had been overly expansive, policy could be tightened by a combination of asset sales and increases in Bank Rate.
"""
[ my emphasis ]
7. Smiling said...
this site should be called '200 homeless blokes trying to save the world'
8. bluebeach said...
What are your views on Bank Rates rising before June next year.....anyone?...... I believe that our team in power will resist any and all attempts to raise... Then under a new Leader, even a Tory one.... will rates rise at speed then?
9. refusetobuy said...
I can't see justification for the start-stop-accelerate policy they have taken.
10. paranoia blue said...
Re: Interest Rates. I can’t see them rising significantly, any time soon, unless, of course, due to IMF intervention.
11. 51ck-6-51x said...
bluebeach said, "What are your views on Bank Rates rising before June next year"
- I am a little uncertain, but here is my take:
If the data continues to be 'rosy' there will be rises during Q2 '10 ( more rosy then we could see rises in Q1, but I doubt that ), but if these reports dry up ( I think this is more probable than not ) then there will be no rises before June '10 and possibly even extended QE as early as Nov '09.
12. uncle tom said...
All comes down to market confidence, which in turn comes down to relative confidence in Sterling vs Euro and Greenback.
If Sterling gets flagged as the weakling among the major currencies, then interest rates could be forced up long before the election.
There is a growing risk that UK debt will lose its triple A rating - that could very easily act as a catalyst..
13. stillthinking said...
Part of reflating the economy is to credibly promise fiscal irresponsibility, i.e. Mervyn can directly influence inflationary expectations.
So why are his pronouncements always that low inflation is set to continue through to the medium term? I think anything coming from the BoE should be treated with a pinch of salt, it is his job to set expectations after all. I think most likely is that higher inflationary expectations by the general public won't translate into demand at all, just that they will look to obtain a sounder store of value, basically to credibly set high inflation would sink the pound and have no affect on domestic demand, the stagflation scenario.
14. 51ck-6-51x said...
UT said, "If Sterling gets flagged as the weakling among the major currencies, then interest rates could be forced up"
- Yes, good point, although I think sterling weakness is actually more likely to prompt asset sales rather than increases in the base rate ( see the bold text in my earlier post ).
15. jack c said...
just to pick up on the point started by bluebeach (Wednesday, August 19, 2009 02:06PM) - I dont see any prospect of the base rate rising in the immediate future however interestingly personal deposit rates are beginning to rise (particualrly long term deposit rates eg 5 year term deposit) as are fixed rate mortgages (I know about the extra premium on risk etc.. argument) - perhaps an indicator of what's to come?
This just landed in my in-box:- NS&I (National Savings and Investments) is increasing the interest rates on its Fixed Interest Savings Certificates, Children’s Bonus Bonds and Direct ISA. The revised interest rates will come into effect from 19 August 2009.
16. This comment has been removed as it was found to be in breach of our Blog Policies.
17. mander said...
Dear Mervyn,
Who is so "Anti-American" in the MPC and dares voting against cash injection? Everyone out there must do everything do devalue their currency or the Chinese will take over. For now I am still happy with the American master but my money lost 30% of its value.
18. who stole my pension? said...
Uncle Tom why stop at 100bn tranches. Surley it is far easier just to add another zero to 200bn i.e. 2000bn. Most people won't notice the extra zero and lets face it how can a simple zero hurt us..... I am off to get my scanner going - can't afford a Xero like mrflibble!
19. down wave said...
It is 'Sir' Mervyn King, not Mr King, Merv the Swerve to all you posting here. Expect more 'handbrake turns'.
20. 51ck-6-51x said...
down wave - one does not have to respect orders of the British empire if one does not wish to do so :)
21. inbreda said...
What disgusting, disgraceful, incompetent, dishonest act did Merv do to get an honour? Did he kill some children? Or was he selling guns
22. down wave said...
17. 51ck-6-51x said...down wave - one does not have to respect orders of the British empire if one does not wish to do so :)
Absolutely, why be introverted down to chronic apathy/chronic appeasement-sympathy by people that have the Queen's sword touch on each shoulder, whereas, she should have decappetaded them.
It is absolutely true, that all of us are expected to lay on the ground and let these arogant idiots starve us to death?