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Mervyn King Gives Evidence To Commons Treasury Committee

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For anyone who’s interested, Mervyn King, Paul Tucker, Spencer Dale, Adam Posen and Andrew Sentance are giving evidence in front of the House of Commons Treasury Committee this morning (10:00 am).

First they’ll be responding to questions on the latest BoE Inflation Report, and later on financial regulation.

The session is being broadcast live on Parliament TV:

http://www.parliamentlive.tv/main/Player.aspx?meetingId=7076

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For anyone who's interested, Mervyn King, Paul Tucker, Spencer Dale, Adam Posen and Andrew Sentance are giving evidence in front of the House of Commons Treasury Committee this morning (10:00 am).

First they'll be responding to questions on the latest BoE Inflation Report, and later on financial regulation.

The session is being broadcast live on Parliament TV:

http://www.parliamen...?meetingId=7076

I'm interested, but I can't view media on this terminal.

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Much of the early discussion is about the wording in the May Inflation report re fiscal tightening which Posen felt crossed the line politically, especially as it was just before an election. Posen said he wasn’t the only one who felt this. Bit of a non-event really, but the MPs are making much of it ‘cos it reflects on the impartiality of the BoE.

More interestingly, both Posen and King expressed uncertainty about the effects of any further QE.

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Asked "Why not raise rates a little now, instead of potentially having to put them up more sharply later" - I'm paraphrasing a bit

1. The markets would respond negatively (which to me read as "would realise inflation is out of the bag")

2. It's better to move correctly than slowly. No need to move in small steps/not necessarily right to do that

3. Inflation will be < target in 2 years so would be a mistake

When pressed on (3) "We've been told that for a while" response was "inflation expectations well anchored while wage growth < 2%"

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Thankyou for the link. The BoE members look nervous. Who is the Chair?

The BoE members look like naughty schoolboys summonsed to the headmasters office. Why are they not hooked up to lie-detector equipment like the criminals they are?

Update - Mervin has just said that the central bank has a responsibilty to keep inflation near to the target. I nearly fell off my chair.

Edited by pyracantha

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Asked "Why not raise rates a little now, instead of potentially having to put them up more sharply later" - I'm paraphrasing a bit

1. The markets would respond negatively (which to me read as "would realise inflation is out of the bag")

2. It's better to move correctly than slowly. No need to move in small steps/not necessarily right to do that

3. Inflation will be < target in 2 years so would be a mistake

When pressed on (3) "We've been told that for a while" response was "inflation expectations well anchored while wage growth < 2%"

How much did they press point 3? Surely after so long of inflation above 2%, a few months of inflation below 2% wouldnt hurt as long as its above 0?

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The BoE members look like naughty schoolboys summonsed to the headmasters office. Why are they not hooked up to lie-detector equipment like the criminals they are?

Why bother? It's collusion. They have been asked to tell some lies and that's what they are doing.

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How much did they press point 3? Surely after so long of inflation above 2%, a few months of inflation below 2% wouldnt hurt as long as its above 0?

Not very hard.

In other answers

Q: "When will QE be unwound?"

A: "When it's the right time."

Q: "When might that be?"

A: "When it's the right time".

(Again paraphrasing)

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Not very hard.

In other answers

Q: "When will QE be unwound?"

A: "When it's the right time."

Q: "When might that be?"

A: "When it's the right time".

(Again paraphrasing)

The only positive to come out of it (by the sounds of the things ) is that the questions are why arent interest rates going up and QE being unwound. Imagine if it was Labour - the questions would be why arent you printing more and can we have negative interest rates

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Its different this time

Not so sure about that. The farce (as I see it) is that the Treasury Select Committee are examining the MPC who, in the context of this meeting, are allegedly responsible for making the decisions on setting interest rates and can set them as they see fit.

I've never believed that the MPC sets the base rate. The markets force, and thereby set, the base rate. Like in the 1990s. So I don't see that aspect is any different this time, it's exactly the same.

When it all turns, it turns very quickly - ask Greece and Ireland :)

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The only positive to come out of it (by the sounds of the things ) is that the questions are why arent interest rates going up and QE being unwound. Imagine if it was Labour - the questions would be why arent you printing more and can we have negative interest rates

Tucker actually said, in so many words "We can't have negative interest rates". I wonder if those words might come back to haunt him.

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Asked "Why not raise rates a little now, instead of potentially having to put them up more sharply later" - I'm paraphrasing a bit

1. The markets would respond negatively (which to me read as "would realise inflation is out of the bag")

2. It's better to move correctly than slowly. No need to move in small steps/not necessarily right to do that

3. Inflation will be < target in 2 years so would be a mistake

When pressed on (3) "We've been told that for a while" response was "inflation expectations well anchored while wage growth < 2%"

What did sentance say to this?

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King: Biggest effect of housing boom of last decade is intergenerational shift of wealth. Young generation taking on high debt, with older generation receiving corresponding monetary wealth. Hasn’t had a major impact on consumer demand.

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Asked "Why not raise rates a little now, instead of potentially having to put them up more sharply later" - I'm paraphrasing a bit

1. The markets would respond negatively (which to me read as "would realise inflation is out of the bag")

2. It's better to move correctly than slowly. No need to move in small steps/not necessarily right to do that

3. Inflation will be < target in 2 years so would be a mistake

When pressed on (3) "We've been told that for a while" response was "inflation expectations well anchored while wage growth < 2%"

DTM - many thanks for this synopsis.

And to think, I was just about to rush out and buy a lot of index linked investments (like the BoE pension fund has) / gold. Lucky I read this thread eh? ( :P ).

Those who want to catch up might be able to do it on freeview 81 at some point (I perhaps should add, that comment was for those who do not wish to install MS SpyLight or whatever it's called).

Edited by Sledgehead

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the man has no sense of irony has he?

He's just said it again. So when we don't see inflation at 1-2% by 2012 I expect they will just come up with a new measure that suits. Merv keeps banging on about accountability - but there isn't any as far as I can see. If their jobs and pensions were dependent on getting things right, then I would say they are accountable.

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  • 145 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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