Bank of England Monetary Policy Committee meeting interest rate predictions

[Horseradish]

What do we think that MPC will announce today then? Business as usual? Faster tightening of bond purchases? ...A rate hike? (ahahha, just kidding)

[hurlerontheditch]

business as usual

 

next month if inflation continues to rise and more shortages, it will be this is short term and will go back to the norm

after that they will talk about interest rates rising in the future (the new way of raising them without raising them)

[Si1]

They'll decide to consider discussing what future date to discuss announcing future tapering of QE. Then they'll increase QE anyway.

 

https://notayesmanseconomics.wordpress.com/2021/09/23/the-bank-of-england-is-lost-at-sea/

 

QE

The evidence to Parliament took a curious turn as the absent-minded professor lived up to his name.

I am often puzzled by the claim about asset prices and QE.

In the case of Dr.Broadbent we could have stopped after the first 4 words. But there was more to come.

I am happy to write to the Committee and make these points in more detail. In real terms, UK equity prices are still a long, long way below their peaks of the 1990s; they have not been strong. House prices have gone up a lot over
the last year, for reasons related to Covid, but before that had risen for 15 years basically in line with wages. The really rapid growth in house prices was before that; it was in the years around the millennium.

There is so much that is wrong here. For example we look at equity prices in real terms but house prices in nominal ones. Also even by his standards this really is a shocking lack of awareness of his own actions.

House prices have gone up a lot over
the last year, for reasons related to Covid

So the economic collapse pushed house prices higher on its own Ben? He has forgotten this from Bank Underground from the 6th September 2019.

We find that the rise in real house prices since 2000 can be explained almost entirely by lower interest rates.

 

So via the interest-rate cuts and QE bond buying that Ben has voted for.

 

----------------------------------

 

Then there is the large tax rise on its way ( which looks a bigger mistake by the day) and the energy price rises and the end of the top-up to Universal Credit. Much more of that and they will be thinking of easing again…..

 

 

Edited September 23, 2021 by Si1

[Ah-so]

I think a hold for this month, but it will be one of the most interesting discussions. 

But over time, I've learned the MPC largely works on the following basis:

- if the price of imported goods is falling, keep interest rates low, because inflation us low. 

- if the price of imported goods is rising, keep interest rates low because the price of imported goods is beyond our control. 

I was once in a non-public with a member of the MPC who was presenting on monetary policy and asked about the link between inflation and interest rates. He said that there was a pretty weak correlation. I knew that and was happy to hear him say it too, but it is always presented in the media as a strong, almost mechanical relationship. I blame A-level Economics textbooks. 

[Ah-so]

8 minutes ago, Si1 said:

They'll decide to consider discussing what future date to discuss announcing future tapering of QE. Then they'll increase QE anyway.

 

https://notayesmanseconomics.wordpress.com/2021/09/23/the-bank-of-england-is-lost-at-sea/

 

QE

The evidence to Parliament took a curious turn as the absent-minded professor lived up to his name.

I am often puzzled by the claim about asset prices and QE.

In the case of Dr.Broadbent we could have stopped after the first 4 words. But there was more to come.

I am happy to write to the Committee and make these points in more detail. In real terms, UK equity prices are still a long, long way below their peaks of the 1990s; they have not been strong. House prices have gone up a lot over
the last year, for reasons related to Covid, but before that had risen for 15 years basically in line with wages. The really rapid growth in house prices was before that; it was in the years around the millennium.

There is so much that is wrong here. For example we look at equity prices in real terms but house prices in nominal ones. Also even by his standards this really is a shocking lack of awareness of his own actions.

House prices have gone up a lot over
the last year, for reasons related to Covid

So the economic collapse pushed house prices higher on its own Ben? He has forgotten this from Bank Underground from the 6th September 2019.

We find that the rise in real house prices since 2000 can be explained almost entirely by lower interest rates.

 

So via the interest-rate cuts and QE bond buying that Ben has voted for.

 

----------------------------------

 

Then there is the large tax rise on its way ( which looks a bigger mistake by the day) and the energy price rises and the end of the top-up to Universal Credit. Much more of that and they will be thinking of easing again…..

 

 

The stock market is only up slightly from its peak in 2000, and below in real terms. But house prices are massively in all senses. 

He also overlooks the huge increase in debt and the M4 money supply. The latter has been discarded as a useful measure for a generation, yet most of the inflationary issues of the last 20 years can be seen in it. 

[Huggy]

Come on, 6% as a starter for this month, really put that firework up the debt junkies' backsides. 🤞

Edit. Oops, didn't realise it was almost 1. On hold at 0.1% again. The feckless live another day, for now.

Bank of England warns energy price surge will push inflation over 4%

https://www.theguardian.com/business/live/2021/sep/23/uk-cost-of-living-energy-households-families-bank-of-england-interest-rates-ftse-pound-business-live

🙄

Edited September 23, 2021 by Huggy

[Horseradish]

1 hour ago, Si1 said:

So the economic collapse pushed house prices higher on its own Ben? He has forgotten this from Bank Underground from the 6th September 2019.

We find that the rise in real house prices since 2000 can be explained almost entirely by lower interest rates.

THAT.

[Horseradish]

1 hour ago, Si1 said:

Then there is the large tax rise on its way ( which looks a bigger mistake by the day) and the energy price rises and the end of the top-up to Universal Credit. Much more of that and they will be thinking of easing again…..

You forgot "the end of Furlough".

[msi]

Inflation: Bank of England says price rises to top 4% by year-end

 

UK inflation is expected to rise above 4% by the end of the year, fuelled by rising energy costs, the Bank of England has warned.

The Bank also said that there were signs the supply chain crisis was starting to hamper the economic recovery, and revised down its growth forecast for the third quarter by 1%.

Despite the inflation forecast a rate rise was not yet needed, the MPC said.

 

 

There you have it.  Bend over and spread 'em wide and take a deep breath and think of England

[petetong]

"The Office for Budget Responsibility calculates that if inflation hit 5 per cent the government would have to pay out an extra £9 billion on index-linked gilts. "

https://www.thetimes.co.uk/article/the-spectre-of-the-seventies-haunts-the-tories-0vb8cpb03

 Didn't realise this, so if they don't put interest rates they are likely to be hit by this.

[msi]

2 minutes ago, petetong said:

"The Office for Budget Responsibility calculates that if inflation hit 5 per cent the government would have to pay out an extra £9 billion on index-linked gilts. "

https://www.thetimes.co.uk/article/the-spectre-of-the-seventies-haunts-the-tories-0vb8cpb03

 Didn't realise this, so if they don't put interest rates they are likely to be hit by this.

Nothing that another 1p on NI doesn't solve

[petetong]

15 minutes ago, msi said:

Nothing that another 1p on NI doesn't solve

Yep very true

[A.steve]

1 hour ago, Ah-so said:

He also overlooks the huge increase in debt and the M4 money supply. The latter has been discarded as a useful measure for a generation, yet most of the inflationary issues of the last 20 years can be seen in it. 

M4 was defined as a broader (and subtly differently defined) measure to M3 - and includes longer maturities.

I think the M4 statistic is interesting, of course, but I am very wary of any interpretation of it.  I think there's a risk of falling for a monetarist fallacy - and being mislead.  I'll (try to) explain.

Monetarists believe that one can measure the amount of money - in a way analogous to the way in which one can count houses, registered citizens or minted coins.  Fiat, however, doesn't work quite the same way... money is debt - and valid debt has a finite time-to-live... we call debts that are never repaid 'bad debts' and they are not supposed to underpin fiat money.  On the surface, at least, measuring the total nominal value of monetary assets seems sensible.. but, perhaps, it isn't.

Assume a money-supply metric of "m" at time "T", and a money-supply metric of "2m" at time "T + 1 year".  A naive interpretation is that there is "twice as much money" after one year... but isthis meaningful?  Consider this scenario:  On day 1: Bank A has a £1bn bond - which, for arguments sake, represents money lent to consumers and spent into the economy.  Bank B lends A £1bn against it... which bank A deposits with Bank C - creating a new £1bn asset - which can then be used to repeat the process on day 2.  Interest charged and interest earned cancel each other out.   If we ignore potential issues with debt service costs and administrative fees (which might not balance out exactly) every other transaction in this story has zero impact on the 'real economy'... but... every interaction creates fresh financial assets - and there is no theoretical limit (ignoring risk of fraud and default for a while) to the number of these fresh financial instruments that can be created... if there is will to do so.  These fresh monetary instruments, in their own right, however, will not have any meaningful consequence.  It is nothing more than a paper-shuffling exercise between bankers... It doesn't extend new credit to consumers; no-one earns the newly created money... and, eventually, it will be destroyed when the loans are repaid.

Obviously, the complexity and counter-party risks are not insignificant. However, the key thing to realize is that the nominal sum of all the financial instruments is not what matters most... What needs to be properly understood is not the nominal sum of all the instruments - but the specific, and systemic, risks associated with each and every individual contract.  Of course, money supply metrics like M4 provide some insight into the total nominal sum of instruments - but it doesn't provide any meaningful insight into inflationary pressure... because we don't have information about the purpose of the loans, or about the parties to whom the borrowed money has been paid.

 

[Social Justice League]

I'm waiting for inflation running at 10% and millions going bankrupt. 

I'm waiting for IR's at 10% and millions of feckless borrowers going bankrupt.

 

I'll get one of them.

[Roman Roady]

25 minutes ago, Social Justice League said:

I'm waiting for inflation running at 10% and millions going bankrupt. 

I'm waiting for IR's at 10% and millions of feckless borrowers going bankrupt.

 

I'll get one of them.

Yes you will and most probably quicker than most would imagine.

13 hours ago, msi said:

Nothing that another 1p on NI doesn't solve

another election promise broken though...and the BoE will be forced into an IR rise anyhow. Why damage the partys election chances when it isnt the party that will raise IR's? I think we are currently seeing the BoE and Govt posturing and positioning for who takes the rap.

[TheCountOfNowhere]

22 hours ago, Horseradish said:

What do we think that MPC will announce today then? Business as usual? Faster tightening of bond purchases? ...A rate hike? (ahahha, just kidding)

I was amused to see this thread....do people really think they will raise iRs ?

They've doubled down on their QE scam and got away with it again.

Why would they stop, the bankers and all their mates are rolling in gold leaf clovers.

Friend of mine in Surrey who is a stock broker who shouldve been bankrupt in 2008 is now moving into a £3 million pad.

Why would the city boys stop robbing people when they are having the mother of all parties ?

[Social Justice League]

Yes welcome to bent Westerm Capitalism.  No wonder so many are giving up working in non jobs to consume worthless tat.

[Pmax2020]

Inflation and job losses will start to impact prices shortly, even if interest rates don’t rise.

I apologise for banging on about it but the rises are everywhere. I find it impossible to get out of Aldi without spending £80-90 on a family shop that used to be nearer £60 for many years. I went back through my Amazon purchases from the last couple of years, clicking on the links to compare today’s price with what I paid. It’s mad. An air fryer I got for £40 is now £80 reduced to £70. A good branded bike seat for the wee one was £74 last summer and is now £125. Laugh all you like but retailers are lapping all this excess cash up. No need to discount anything right now - some muppet will just pay top dollar. 

Takeaway food costs a fortunate now - that’ll go unnoticed with a lot of these morons. Excellent. 

[Pmax2020]

When they say Christmas is going to cost more they’re not joking… we paid £6.99 for this in April. It’s now £20.

https://www.amazon.co.uk/dp/B07SS3S6CT?ref=ppx_pop_mob_ap_share

Nice Christmas tax.

 

[winkie]

Stuff only holds the price asked if there are those that will pay it...... Christmas doesn't have to be a big money splurge on new stuff.......there is still a massive of excess stuff everywhere, swap, share, recycle what we already have. The kids won't mind, they are usually bored of it by the new year anyway.... always something else.

Some brilliant kids toys to find in charity shops, just got to wash and find a box and some wrapping paper......

[Pmax2020]

19 minutes ago, winkie said:

Stuff only holds the price asked if there are those that will pay it...... Christmas doesn't have to be a big money splurge on new stuff.......

I couldn’t agree more but cost of second hand toys has been pushed higher and higher. I spent ages finding a good deal on a used Nintendo Switch for the kids. The games are barely 10-15% cheaper if you opt for second hand copies. The console itself is around £200 used most places which is pretty crazy considering it could pack in a week later. 

[winkie]

1 hour ago, Pmax2020 said:

I couldn’t agree more but cost of second hand toys has been pushed higher and higher. I spent ages finding a good deal on a used Nintendo Switch for the kids. The games are barely 10-15% cheaper if you opt for second hand copies. The console itself is around £200 used most places which is pretty crazy considering it could pack in a week later. 

How about seeing that your kids lead the pack not following what everyone else was......not getting everything you want always is good for character building.....they know you love them.

[Flat Bear]

I was a bit disappointed reading the minutes.

I did skim through but could not find any mention about them being vigilant☹️. The closest thing was "The Committee would be monitoring closely the incoming evidence" a couple of times.

It seems they are no longer being vigilant but just monitoring closely🤔.

 

[winkie]

 

[Mikhail Liebenstein]

21 hours ago, winkie said:

How about seeing that your kids lead the pack not following what everyone else was......not getting everything you want always is good for character building.....they know you love them.

Yes, I cut my programming teeth on programmable calculators before getting a computer as a child.

Some of the Vintage HP business models are offered at crazy money: https://www.ebay.co.uk/itm/Vintage-HP-16C-Scientific-Calculator-Working-Vintage0