Confidence in the Bank of England crashes to record low

[Unmoderated]

20 minutes ago, Flat Bear said:

Yikes, well that's not standard economic theory.

 Must admit I really did laugh out loud.

Edited to add

Apparantly he has not been moderated in any shape or form.

See above. More than happy for you to join the debate but if you're continuing to post sniping comments it's not really adding to the discussion. 

[slawek]

GBPUSD @ 1.2 again.

[BaldED]

Britain is becoming Europe's sick man again and needs stronger medicine now

The country's economic crisis demands tough decisions to be made by its central bankers and politicians

KATE ANDREWS1 July 2022 • 12:00pm

 

Andrew Bailey needs to stop dithering and acting like a neutral factor in the economic crisis we’re in CREDIT: Jason Alden/Bloomberg

We can only hope that, one day soon, Andrew Bailey will wake up and realise he is the Governor of the Bank of England. Yet based on his most recent remarks at the European Central Bank conference in Portugal this week, it’s still not clear Bailey is aware of the critical role he plays in shaping UK monetary policy. 

“The key thing for us is to bring inflation back down to target,” he announced to a room full of bankers. Yes, this is quite the “key”. In fact we’ve been desperate for the Bank to tackle inflation for many months now, so it’s refreshing to know this is an acknowledged priority. 

“That is what we will do,” Bailey pronounced in his follow up. Again, good news. How? When? Is there any plan of action, apart from the Bank’s governor talking about the UK economy as if the role he plays is a minor one, at best?

If there’s any generous reading to be done of Bailey’s remarks, it was the not-so-subtle indication that the Bank is considering a 50 basis points jump in interest rates, signalling to markets that faster action may succeed the rather conservative 25 basis points rises we’ve now experienced five times in a row. 

Of course Bailey can’t say directly how quickly interest rates will rise in the future – not least because he can’t assume how the other eight members of his Monetary Policy Committee will vote – but with the Federal Reserve now taking bullish action on rates, the pressure is on for the BoE to follow. Now that the Fed is putting in the hard work, Bailey is indicating the Bank might also rise to the occasion. 

But in many ways, it’s too little too late. Central bankers were still in denial about inflation when the headline rate was already double the Bank’s 2pc target. There was no move on interest rates when hiking them could have made a meaningful difference to curbing price spirals – and given the bank more international credibility to handle the current situation. 

Market expectation is now for rates to reach 3pc: a substantial rise from where we were last winter, when rates were still hovering at record lows. But while this would still be a historically low rate, such a rise will come as a serious shock to generations of borrowers who aren’t used to accounting for interest rate hikes. 

As one MP puts it to me: “This is going to be a disaster. We are about to experience sky-high inflation alongside higher borrowing costs, but not high enough that it makes a serious difference to prices.” 

In other words, the failure of the Bank to act for so long means that interest rate hikes now risk increasing financial pain without the benefit of tackling higher prices.

All this contributes to the growing risk that the UK could soon become the sick man of Europe. Bailey hinted at this in his comments too. “I think the UK economy is probably weakening rather earlier and somewhat more than others,” he said – again, more like a passive commentator than an active participant. 

GDP Change

The problem is two-fold. Like the rest of Europe, Britain is experiencing a serious shock to its energy sector, as Putin’s war has sent oil and gas prices spiralling, increasing competition for non-Russian supplies. 

And like the United States, Britain is suffering from an extremely tight labour market, which is also driving prices up, as the official unemployment rate sits at historical lows and the job vacancy rate at a record high of 1.3m. It is the latest example of a long-standing problem: the UK having European levels of taxation and American-quality public services. 

As a result, Britain is on track for inflation to peak in the double digits, with current forecasts estimating 11pc. Inflation in America, while thought to be politically disastrous (dubbed ‘Bidenflation’ by the American right, gearing up for the midterm elections this November), is still below UK levels. The EU average also currently sits behind the UK, at 8.8pc.

The picture of the sick man is, of course, complex: the most recent projections show Britain’s economy growing more than the Euro-17 this year. Both France and America have reported contractions to their economies already, in the first quarter of the year, while Britain’s economy was confirmed on Thursday to have grown by 0.8pc. 

But with inflation so extreme in the UK, this (rather lacklustre) growth is cancelled out in practical terms. Real household income was down by 0.2pc between January and March, falling for the fifth consecutive quarter: so while Brits are being told that their domestic economy is growing, they feel in their pockets and pay packets that their purchasing power is shrinking.

And it’s going to get worse, according to Bailey, as we experience a ‘further step-up in UK inflation later this year’ when the energy price cap rises once more – by some current estimates, by at least £1,000. So the better growth the UK is experiencing now compared to its neighbours is still at risk of taking a downward turn.

If that happens, central bankers, and indeed politicians, still seem underprepared for difficult times. It’s been well-established that they can print and spend money, but the more difficult decisions remain off-limits. 

To tackle the tight labour market, this should include considering visa extensions, at least in the short term, and discussions around how to get Britain’s five million missing workers back into the workforce. To tackle rising energy costs, politicians need to seriously consider what they can trim back and cut to let people keep more of their earnings.

And the Bank needs to stop dithering and acting like a neutral factor in the economic crisis we’re in. That starts with its governor.

[andrewwk]

4 hours ago, BaldED said:

Britain is becoming Europe's sick man again and needs stronger medicine now

The country's economic crisis demands tough decisions to be made by its central bankers and politicians

KATE ANDREWS1 July 2022 • 12:00pm

 

Andrew Bailey needs to stop dithering and acting like a neutral factor in the economic crisis we’re in CREDIT: Jason Alden/Bloomberg

We can only hope that, one day soon, Andrew Bailey will wake up and realise he is the Governor of the Bank of England. Yet based on his most recent remarks at the European Central Bank conference in Portugal this week, it’s still not clear Bailey is aware of the critical role he plays in shaping UK monetary policy. 

“The key thing for us is to bring inflation back down to target,” he announced to a room full of bankers. Yes, this is quite the “key”. In fact we’ve been desperate for the Bank to tackle inflation for many months now, so it’s refreshing to know this is an acknowledged priority. 

“That is what we will do,” Bailey pronounced in his follow up. Again, good news. How? When? Is there any plan of action, apart from the Bank’s governor talking about the UK economy as if the role he plays is a minor one, at best?

If there’s any generous reading to be done of Bailey’s remarks, it was the not-so-subtle indication that the Bank is considering a 50 basis points jump in interest rates, signalling to markets that faster action may succeed the rather conservative 25 basis points rises we’ve now experienced five times in a row. 

Of course Bailey can’t say directly how quickly interest rates will rise in the future – not least because he can’t assume how the other eight members of his Monetary Policy Committee will vote – but with the Federal Reserve now taking bullish action on rates, the pressure is on for the BoE to follow. Now that the Fed is putting in the hard work, Bailey is indicating the Bank might also rise to the occasion. 

But in many ways, it’s too little too late. Central bankers were still in denial about inflation when the headline rate was already double the Bank’s 2pc target. There was no move on interest rates when hiking them could have made a meaningful difference to curbing price spirals – and given the bank more international credibility to handle the current situation. 

Market expectation is now for rates to reach 3pc: a substantial rise from where we were last winter, when rates were still hovering at record lows. But while this would still be a historically low rate, such a rise will come as a serious shock to generations of borrowers who aren’t used to accounting for interest rate hikes. 

As one MP puts it to me: “This is going to be a disaster. We are about to experience sky-high inflation alongside higher borrowing costs, but not high enough that it makes a serious difference to prices.” 

In other words, the failure of the Bank to act for so long means that interest rate hikes now risk increasing financial pain without the benefit of tackling higher prices.

All this contributes to the growing risk that the UK could soon become the sick man of Europe. Bailey hinted at this in his comments too. “I think the UK economy is probably weakening rather earlier and somewhat more than others,” he said – again, more like a passive commentator than an active participant. 

GDP Change

The problem is two-fold. Like the rest of Europe, Britain is experiencing a serious shock to its energy sector, as Putin’s war has sent oil and gas prices spiralling, increasing competition for non-Russian supplies. 

And like the United States, Britain is suffering from an extremely tight labour market, which is also driving prices up, as the official unemployment rate sits at historical lows and the job vacancy rate at a record high of 1.3m. It is the latest example of a long-standing problem: the UK having European levels of taxation and American-quality public services. 

As a result, Britain is on track for inflation to peak in the double digits, with current forecasts estimating 11pc. Inflation in America, while thought to be politically disastrous (dubbed ‘Bidenflation’ by the American right, gearing up for the midterm elections this November), is still below UK levels. The EU average also currently sits behind the UK, at 8.8pc.

The picture of the sick man is, of course, complex: the most recent projections show Britain’s economy growing more than the Euro-17 this year. Both France and America have reported contractions to their economies already, in the first quarter of the year, while Britain’s economy was confirmed on Thursday to have grown by 0.8pc. 

But with inflation so extreme in the UK, this (rather lacklustre) growth is cancelled out in practical terms. Real household income was down by 0.2pc between January and March, falling for the fifth consecutive quarter: so while Brits are being told that their domestic economy is growing, they feel in their pockets and pay packets that their purchasing power is shrinking.

And it’s going to get worse, according to Bailey, as we experience a ‘further step-up in UK inflation later this year’ when the energy price cap rises once more – by some current estimates, by at least £1,000. So the better growth the UK is experiencing now compared to its neighbours is still at risk of taking a downward turn.

If that happens, central bankers, and indeed politicians, still seem underprepared for difficult times. It’s been well-established that they can print and spend money, but the more difficult decisions remain off-limits. 

To tackle the tight labour market, this should include considering visa extensions, at least in the short term, and discussions around how to get Britain’s five million missing workers back into the workforce. To tackle rising energy costs, politicians need to seriously consider what they can trim back and cut to let people keep more of their earnings.

And the Bank needs to stop dithering and acting like a neutral factor in the economic crisis we’re in. That starts with its governor.

True words, but a bit of a cheek coming from Brexiteer right-wing media shill disaster capitalist Kate Andrews (of Legatum / Institute of Economic Affairs fame...)

[scottbeard]

On 21/06/2022 at 08:58, Warlord said:

What can you do prepare? The best advice is don't leave too much money in a zombie UK failed bank! 

People may scoff but I think they're all going under again and this time there WILL BE NO BAIL OUT as there is NO MONEY and printing it again makes things a lot worse.  Therefore you need to assume your money is not safe. Convert it into something physical (yes, that's gold or silver )

Laugh all you want but I only keep enough in the bank to pay bills... If the banks and institutions go under it'll be too late for you and you will need to join the queue .

Six months on from this comment and the position is:

- No UK high street banks have gone bust

- The comment "they're all going under again and this time there WILL BE NO BAIL OUT" is so far not correct

Shall we come back again in 6 more months to see if the sky has fallen yet...?

[Warlord]

30 minutes ago, scottbeard said:

Six months on from this comment and the position is:

- No UK high street banks have gone bust

- The comment "they're all going under again and this time there WILL BE NO BAIL OUT" is so far not correct

Shall we come back again in 6 more months to see if the sky has fallen yet...?

Patience...

[Dreamcasting]

Nobody is going to lose any money where a UK bank is concerned. It's not possible to "lose" numbers on a spreadsheet.

The governments can however ban gold and silver, or anything else for that matter.

 

[scottbeard]

On 21/06/2022 at 08:58, Warlord said:

What can you do prepare? The best advice is don't leave too much money in a zombie UK failed bank! 

People may scoff but I think they're all going under again and this time there WILL BE NO BAIL OUT as there is NO MONEY and printing it again makes things a lot worse. 

We're back again after a year.....and the position is once again:

- No UK high street banks have gone bust

- The comment "they're all going under again and this time there WILL BE NO BAIL OUT" is so far not correct

Let's come back again next year shall we?