Boe 'hurt By Uk Growth Targets'

[maker of things]

Some interesting quotes in here... its a bit late to be calling for a need to understand links between house prices and spending? Last ditch attempt to 'save the day' prior to the big crash?

http://news.bbc.co.uk/1/hi/business/6188305.stm

"In reference to the view that interest rates, house prices and inflation influence one and other, the Committee said that in reality the links were not that well understood.

"The Committee recommend that the Bank of England undertake extensive research on the link between house prices and consumer spending to establish a better understanding," it said."

AND GET THIS:

"They also called for greater transparency in how members are chosen for the Bank's Monetary Policy Committee (MPC), which sets interest rates.

New external members are appointed solely by the Chancellor Gordon Brown, and a way that is shrouded in mystery and may not always result in the most suitable appointments, the Committee said."

BoE 'hurt by UK growth targets'

Gordon Brown's forecasts have come under scrutiny before

The UK's "over-optimistic" forecasts for economic growth have not helped the Bank of England set interest rates or manage monetary policy, a report says.

UK growth targets have been too high for the past five years, the House of Lords Economic Affairs Committee said.

As a result, the UK's budget deficit and borrowing requirements have been underestimated, the committee claimed.

Despite being criticised for previous years, the Treasury expects economic growth to top its forecasts in 2006.

The Treasury had predicted that growth would be between 2% and 2.5% in 2006. Analysts expect a figure as high as 2.6%.

Replying to the Committee's comments, the Treasury said that "fiscal and economic forecasting is complex".

"But the government's record is good, with forecasts generally in line with consensus on both economic growth and the public finances," it added.

"What matters for the Bank of England is how well they target inflation, and in this area they have an excellent record of meeting the 2% target."

'Extensive research'

Forecasts have often proved controversial because the government has been basing its spending and borrowing plans on the Treasury's economic growth forecasts.

Should growth be seen to be slowing, then some observers would have argued for the government to rein in spending in order to keep the budget deficit under control and slow the rate of inflation.

This year the UK's budget deficit has climbed to record levels - though it is seen narrowing in coming months - and the rate of inflation has peaked at its highest level in almost a decade.

The Committee recommend that the Bank of England undertake extensive research on the link between house prices and consumer spending

Economic Affairs Committee

In response to the pressures, the Bank of England has been raising its key interest rate, which now stands at 5%. Many analysts have predicted another quarter-of-a-percentage-point rate increase in the first few months of 2007.

The House of Lords Committee said in their report, The Current State of Monetary Policy, that over estimating UK growth may have contributed to the increases in interest rates once the true picture became clear.

In reference to the view that interest rates, house prices and inflation influence one and other, the Committee said that in reality the links were not that well understood.

"The Committee recommend that the Bank of England undertake extensive research on the link between house prices and consumer spending to establish a better understanding," it said.

Hiring policy

They also called for greater transparency in how members are chosen for the Bank's Monetary Policy Committee (MPC), which sets interest rates.

New external members are appointed solely by the Chancellor Gordon Brown, and a way that is shrouded in mystery and may not always result in the most suitable appointments, the Committee said.

Some members also lack experience in setting monetary policy, though once they are in the job, they should have a single term of service of four years rather than the three they currently get, it recommended.

[Objective Developer]

It looks to me like posturing before a blame game. Could it be that the Government is getting ready to blame the BoE when the inflation cat is let out of the bag?

I’m not sure, but it does seem a tad foolish to have only just ‘noticed’ that house prices ‘might’ have some relationship to inflation.

This kind of thing makes the BoE look incompetent (which may or may not be true), but the call for transparency as to how members are selected is interesting.

[HAL]

It looks to me like posturing before a blame game. Could it be that the Government is getting ready to blame the BoE when the inflation cat is let out of the bag?

I’m not sure, but it does seem a tad foolish to have only just ‘noticed’ that house prices ‘might’ have some relationship to inflation.

This kind of thing makes the BoE look incompetent (which may or may not be true), but the call for transparency as to how members are selected is interesting.

I remember not long ago the BOE said that house prices had de-coupled from the CPI and that HPI would no longer be targetted....

Are they saying now that if house prices fall they should be included in the equation? (more like)...

Bunch of sniffling little sh1t bags.

Does'nt take much nounse to know that HPI impact everything both on the way up and on the way down - probaem is they want their cake and eat it... they control the rules and set the playing field.

HAL

[maker of things]

It looks to me like posturing before a blame game. Could it be that the Government is getting ready to blame the BoE when the inflation cat is let out of the bag?

Definitely This.

Gov't want to look as though they are 'aware of a situation before it happens' and are 'doing all they can to put right'.

Which means highlighting the fact then putting the Bank on the chopping block ready for when the axe falls.

[Jason]

Have you noticed how it implies the optomistic forecast has lead to higher rates, i.e. if the forecasts were more accurate rates would be lower.

What about the other side of the coin? If the forecasts were higher public borrowing would (and was) higher. This leads to higher inflation.

It's just a blame game...!

(Notice how it's quickly moved off the front page, no link there anymore)

[Willy Weasel]

I read an interesting book called 'Why most things fail' which talked about why companies fail. One interesting section showed the growth predictions of successive Chancellors which on average were out by 50%. The point the author was making was that no Chancellor has ever successfully predicted the growth in GDP in this country and that bearing in mind the sophisticated economic models the Treasury uses, if they can't get their predictions within 50% then there's no hope for the rest of us in predicting things like house prices.

Doesn't stop us trying, of course

[deano]

"The Committee recommend that the Bank of England undertake extensive research on the link between house prices and consumer spending to establish a better understanding," it said."

Oh for FS-People borrow against thier homes and spend it causing economic growth. Who the Hell are these muppets!.

"They also called for greater transparency in how members are chosen for the Bank's Monetary Policy Committee (MPC), which sets interest rates.

New external members are appointed solely by the Chancellor Gordon Brown, and a way that is shrouded in mystery and may not always result in the most suitable appointments, the Committee

Yeah Thats the independant BoE theory in the bin then.

As a result, the UK's budget deficit and borrowing requirements have been underestimated, the committee claimed.

The country's bust and they know it.

Replying to the Committee's comments, the Treasury said that "fiscal and economic forecasting is complex".

We got the calc's wrong - is not our fault - the maths was hard!.

"But the government's record is good, with forecasts generally in line with consensus on both economic growth and the public finances," it added.

His public sector borrowing figures were what 400% out. Now they are just plain lieing.

[BrickingIt]

Despite being criticised for previous years, the Treasury expects economic growth to top its forecasts in 2006.