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Guest Charlie The Tramp

Governor's Defeat Last Time Heralds Rise To 6pc

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Guest Charlie The Tramp
As he went round the table and asked for each of his eight fellow members' votes, it must have slowly but surely dawned on Mervyn King that things were not going his way. By the time the spotlight returned to him, it will have become clear to the frustrated Governor that, whatever he did, interest rates were going to stay on hold this month.

Only one question remained: should he go with the majority, or should he follow his convictions and vote for an increase, risking causing a major market fuss when it emerged that he had been outvoted for only the second time?

Governor's defeat last time heralds rise to 6pc

Might Mr King have been secretly doubting their true intentions? His first term as Governor ends next year, and some in the Bank suspect that a couple of the committee members are voting with half an eye on his chair, knowing that if Gordon Brown chooses not to reappoint Mr King he will baulk at appointing another hawk.

The internal tensions will also have been intensified by the lingering knowledge of what happened the last time Mr King was outvoted, at the August 2005 meeting when the MPC cut rates to 4.5pc. Many economists feel in retrospect that the decision was a dreadful mistake, and that it worsened the conditions that have contributed to the recent rise in inflation.

They will be hoping history does not repeat itself.

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"His first term as Governor ends next year, and some in the Bank suspect that a couple of the committee members are voting with half an eye on his chair"

If true, despicable.

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"His first term as Governor ends next year, and some in the Bank suspect that a couple of the committee members are voting with half an eye on his chair"

If true, despicable.

First they want his job, now they want his furniture - what's this country coming to I ask you!

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An interesting point made in that Torygraph article was that each member announces their vote in turn, with Merv going last. So when he voted 'no', he knew he was being outvoted, thereby leaving open the possibility that he was making a statement rather than seriously trying to make the rise happen this month. In other words, an 'I'm telling you so', in order that he can put that in the past tense if and when the economy's gone seriously pear-shaped.

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Guest Charlie The Tramp

I predict that Alistair Darling will be offered the Chancellor`s job by Gordon Brown and Ed Balls becomes Chief Secretary to the Treasury. By year end they both will become Hawks and Brown will have a Blair/Brown stand off with both of them.

Interesting times ahead as the battle takes place to offer Mervyn King a further tenure as Governor of the BoE. ;)

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First they want his job, now they want his furniture - what's this country coming to I ask you!

:lol: Very good. I've been browsing Rightmove tonight and needed a genuine laugh (that wasn't of derision)

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Governor's defeat last time heralds rise to 6pc

I asked him about being outvoted last thursday (yes, I did, really!!) and he stated that the members disagree on many issues.. However he does get to vote last and most importantly..

He said that he and the BoE only say things when things are needed to be said in order not to generate noise. So my personal opinion is that Mervyn is clearly signalling his motives in this case.

Ad.

Edited to add: Mervyn's instincts were proven right in the August 2005 vote which carries weight. I think the city might also baulk at the appointment of a doveish governor, though there might be some internal politics going on... Lomax might have her eyes on the chair for sure.

Edited by adamUK

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Should be a secret vote.

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He said that he and the BoE only say things when things are needed to be said in order not to generate noise. So my personal opinion is that Mervyn is clearly signalling his motives in this case.

Ad.

Edited to add: Mervyn's instincts were proven right in the August 2005 vote which carries weight. I think the city might also baulk at the appointment of a doveish governor, though there might be some internal politics going on... Lomax might have her eyes on the chair for sure.

Isn't now equally possible that Mervyn has decided upon where he feels that IR's should be and rather follow his natural moderately hawkish tendencies he is adopting a hardcore line if only for when the blame game starts in 6-9 months time such that he can't then realistically be fingered as responsible at least in the eyes of the city.

IMHO one of reasons if not the key reason that the MPC mechanism has worked so well so far is that the city had faith that the actions taken where not politically motivated rather that they where and are for the general good. The divergence of effective rates from BOE repo as highlighted by the repricing of fixed rate mortgages and dramatically improved savings accounts suggests that a serious lost of faith is brewing up should the MPC not start behaving as the city expects.

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Should be a secret vote.

It bleeding well should not. These people have to be individually accountable for their actions.

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Doesn't matter. Bond yields are speaking for them. Remember the vote was before the money market turmoil. They'll have to pander to the city like Gordie wants them too. It's worth pointing out the city was calling for a cut in August 2005, that's not the case now.

This past month I have begun to really agree with OnlyMe on this. The BOE are irrelevant.

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It bleeding well should not. These people have to be individually accountable for their actions.

Agreed but at the least it should be done "Weakest Link" style with each member putting their vote down in writing first and then announcing. Under the present system people can change vote to make it seem they are/or are not rocking the boat.

Edited by gilf

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