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B O E's Ex-Pin-Up Girl Katy Barker Says Bank Has Lost Credibility

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http://www.bloomberg.com/news/2011-02-04/bank-of-england-may-have-lost-some-credibility-on-inflation-barker-says.html

Barker Says BOE Has Lost Some Credibility on Inflation Bout
By Jennifer Ryan - Feb 4, 2011 10:08 AM GMT
The Bank of England may have suffered a setback to its credibility as it struggles to contain an inflation rate that has accelerated to almost twice its 2 percent target, former policy maker Kate Barker said.
“There’s a perception in business as well as in financial markets that the committee has perhaps been behaving in a different way coming out of the crisis and has tolerated inflation more than you might have expected,” Barker said late yesterday at an event hosted by Anglia Ruskin University in Chelmsford, England. Companies “probably have less belief that it will come back to 2 percent than in the good old days, and that’s a sort of modest loss of credibility.”

What Sue Katy fails to understand is this: An IR hike will lay the already badly wobbling housing market to utter waste. Merv is not going to pull that trigger.

Edited by Realistbear

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More interesting comments from MPC members.

So far this year we have Paul Fisher "inflation uncomfortably high"

Charlie Bean "Bank may be forced into a not nice rate rise"

Now Kate Barker "bank losing credibility on inflation"

We already have Weale and Sentance voting for it. Three more makes a majority...

Edited by Pent Up

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More interesting comments from MPC members.

So far this year we have Paul Fisher "inflation uncomfortably high"

Charlie Bean "Bank may be forced into a not nice rate rise"

Now Kate Barker "bank losing credibility on inflation"

We already have Weale and Sentance voting for it. Three more makes a majority...

Government policy is to protect the banks and the banks have a lot to lose in a HPC of severe proportions. No rise likely IMO.

In a way I agree with BoE policy to do nothing because a rise will destroy our economy as houses get crushed. That said--its coming anyway so it makes little difference--pain now or later. Hike now or later. The result will be the same as the market will always win.

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http://www.bloomberg.com/news/2011-02-04/bank-of-england-may-have-lost-some-credibility-on-inflation-barker-says.html

Barker Says BOE Has Lost Some Credibility on Inflation Bout
By Jennifer Ryan - Feb 4, 2011 10:08 AM GMT
The Bank of England may have suffered a setback to its credibility as it struggles to contain an inflation rate that has accelerated to almost twice its 2 percent target, former policy maker Kate Barker said.
“There’s a perception in business as well as in financial markets that the committee has perhaps been behaving in a different way coming out of the crisis and has tolerated inflation more than you might have expected,” Barker said late yesterday at an event hosted by Anglia Ruskin University in Chelmsford, England. Companies “probably have less belief that it will come back to 2 percent than in the good old days, and that’s a sort of modest loss of credibility.”

What Sue fails to understand is this: An IR hike will lay the already badly wobbling housing market to utter waste. Merv is not going to pull that trigger.

I don't think question of sport has anything to do with it?

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Kate Barker always seemed to be quite conformist in her views so this might be an indication that the consensus has already shifted on the MPC.

The consensus shifted at the January meeting. Read the minutes, they basically agreed that rates could be raised without to much damage. Although that was before the unexpected GDP figures.

If it wasn't for that GDP figure I would have put money on rates going 25bp on Thursday.

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Government policy is to protect the banks and the banks have a lot to lose in a HPC of severe proportions. No rise likely IMO.

In a way I agree with BoE policy to do nothing because a rise will destroy our economy as houses get crushed. That said--its coming anyway so it makes little difference--pain now or later. Hike now or later. The result will be the same as the market will always win.

This has been clear since very early on:

Allow deflation and the markets will correct in a very sharp, relatively short fashion.

Try to inflate (print) out of trouble and spread the pain over a very long period of time, but less acute pain.

It's like eating some dodgy curry for your evening meal and deciding if you want to throw up and get some sleep or try to hold everything down and endure a night of extreme discomfort with the possibility of something really nasty (food poisoning) at the end.

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Gavyn Davies - Commodity shock is a nightmare for Central Bankers

http://blogs.ft.com/gavyndavies/2011/02/04/commodity-shock-is-a-nightmare-for-central-bankers/

Here is the problem.

There is a very big difference between a self-reversing up-and-down cycle in the commodity markets, and a longer term upward trend in commodity prices relative to the prices of goods and services produced in the developed economies. Because commodity prices are determined in competitive markets which need to clear at any point in time, they tend to fluctuate much more over short periods than the “sticky” prices and wages which exist in developed economies. If they are simply fluctuating around a constant or slowly rising trend, then they will quickly self-correct and the central bank should stay focused on the core inflation rate which is set in the rest of the economy.

But what if commodity prices are instead embarked on a long term uptrend against the prices of goods and services in the developed economies, driven by the rapid growth in the emerging economies? In that case, the commodity price shock would have a permanent effect on input prices in the developed economies, and it would not be appropriate for the central banks to ignore this shock. In fact, if they ignored it, they would simply be accommodating a permanent inflation shock to the system, which is what they did in the inflationary 1970s.

So it is a very difficult judgment. My own view, based on the arguments above, is that the central banks are justified in waiting for more data before concluding that the rise in commodity prices is permanent. But the economic evidence for this point of view is stronger in the the US than it is in the eurozone; and it is stronger in the eurozone than it is in the UK.

And that is why the Fed is the most reluctant of all the major central banks to reconsider the comfortable orthodoxy of the last 15 years, even as commodity prices continue to rise.

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ftblog78-590x444.gif

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Government policy is to protect the banks and the banks have a lot to lose in a HPC of severe proportions. No rise likely IMO.

In a way I agree with BoE policy to do nothing because a rise will destroy our economy as houses get crushed. That said--its coming anyway so it makes little difference--pain now or later. Hike now or later. The result will be the same as the market will always win.

There wont be a real recovery until the banks are run as proper businesses and allowed to go bust and house prices are once again affordable. how that comes about is the key question.

I for one would whack up rates and get the recovery started.

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There wont be a real recovery until the banks are run as proper businesses and allowed to go bust and house prices are once again affordable. how that comes about is the key question.

I for one would whack up rates and get the recovery started.

+1. Interest rates seem to be the final peg keeping house prices up IMO. The BoE now gets to chose how long this crash takes, a matter of years with decent rate rises of a matter of decades with the current farsicle policy. My money is on the latter as housing is the UK economy.

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Barker Says Bank of England Has Lost Some Credibility From Inflation Bout

SOME?!! :o

It has no credibility left to lose. A totally discredited entity.

It had even started to lose control of the RPIX 2.5% target before the target was changed to CPI 2% in December 2003. RPIX is now near 5%. Total FAIL.

Edited by billybong

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Guest sillybear2

Companies “probably have less belief that it will come back to 2 percent than in the good old days, and that’s a sort of modest loss of credibility.”

That being the huge credit bubble they wilfully ignored? :rolleyes:

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Wasn't there once a thread on here about Barker saying MPC policy had protected house prices?

Kate Barker, a former member of the Bank of England's monetary policy committee, is to join the board of Taylor Wimpey.

Barker, who served on the MPC from 2001 to 2010 and was a housing advisor to the Government, will join the housebuilder as a non-executive director in April.

She is expected to earn £60,000 a year in the part-time role — just the latest she has taken up since she left Threadneedle Street.

Barker is a non-executive director of Electra Private Equity and Yorkshire Building Society as well as a senior advisor to investment bank Credit Suisse.

She will stand down from her board position at the Homes and Communities Agency before joining Taylor Wimpey

Read more: http://www.thisismoney.co.uk/markets/article.html?in_article_id=522355&in_page_id=3#ixzz1CzzhAV1b

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There's an HPC tradition that all posts about pin-up girls are accompanied by a picture. ;)

Believe me, he's done you a favour not posting one.

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Companies “probably have less belief that it will come back to 2 percent than in the good old days

That'll be getting on for the best part of 8 years ago in the early days when the BoE met it's inflation target - the good old days.

Edited by billybong

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  • 311 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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