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Boe's Mr Bean Says Qe A Success But Inflation Too High

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http://uk.reuters.com/article/2011/02/25/uk-boe-inflation-idUKTRE71O5JM20110225

The Bank of England's quantitative easing has been effective, but the subsequent recovery in nominal demand has created a situation where inflation is too high, Bank Deputy Governor Charles Bean said on Friday.

Some economists who doubt the Bank's commitment to tackling inflation have accused it of focussing behind closed doors on nominal growth -- the sum of real economic growth and inflation -- rather than its primary goal of 2 percent inflation.

Bean himself did not blame the Bank's QE policy directly for inflation that is now at 4 percent, saying higher global commodity prices, a rise in value-added tax and a drop in sterling in 2007-08 were mostly to blame.

Britain's nominal GDP growth, or rate of growth in output in cash terms, averaged 5 percent before the financial crisis, a level consistent with sustainable real economic growth and inflation at the Bank's 2 percent target, Bean said.

Nominal GDP growth fell sharply during the recession, and recovered only after the BoE bought more than 200 billion pounds of assets, overwhelmingly government bonds.

"By that standard, it looks like policy has been effective, though of course other factors besides monetary policy have certainly also been at work," Bean said in a speech at a University of Chicago monetary policy conference in New York.

However, the improvement in nominal GDP was driven by an undesirable increase in inflation rather than by real GDP, Bean said.

"While the overall rate of nominal demand growth has been satisfactory, the split between inflation and activity has certainly not been everything we would wish," he said.

INFLATION CHALLENGE

Bean did not say how the BoE should deal with above-target inflation while supporting growth. He voted to maintain interest rates at their record low 0.5 percent this month as part of a 6-3 majority in favour of keeping rates on hold.

Economists expect the central bank to raise rates gradually later this year, and money markets predict the first rise will come in May.

Bean said that interest rates rather than quantitative easing should be a central banker's main tool during normal economic circumstances.

Inflation too high but printing funny money has nothing to do with it. Genius. If only we could view the world through their eyes. What ever he's on I wish he'd share it with the rest of us.

Mr-Bean-mr--bean-166164_425_657.jpg

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I know, it's such bad luck that shortly after they printed a load of money the value of the pound dropped resulting in inflation in commodity prices. It's almost as if the two events were connected in some way.

Luckily though the bank has assured us that they are purely coincidental so there is no need to raise interest rates. So we can all sleep easy at night.

As you were...

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I know, it's such bad luck that shortly after they printed a load of money the value of the pound dropped resulting in inflation in commodity prices. It's almost as if the two events were connected in some way.

Luckily though the bank has assured us that they are purely coincidental so there is no need to raise interest rates. So we can all sleep easy at night.

As you were...

Move along, nothing to see here

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  • 312 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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