Category: BoE

Bank of England lifts rates for first time in a decade

FT/Chris Giles & Gemma Tetlow/11-02-17

The Bank of England has increased interest rates by a quarter of a percentage point, to 0.5 per cent and signalled that the first rate rise in a decade will be the start of a gradual increase in borrowing costs.

Voting seven to two in favour of the rate rise, the bank’s Monetary Policy Committee forecast that inflation would remain well above the central bank’s 2 per cent target if interest rates had stayed at 0.25 per cent. The committee indicated that two further quarter of a percentage point rate rises would be needed during the next two years to control prices.

PG View: Wow, two more quarter point hikes over the next two years. Quite the tightening campaign . . .

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Posted in BoE, Central Banks, Monetary Policy |

Outside the Box Low Inflation Is No “Mystery”

Mauldin Economics/John Mauldin/09-27-17

When is a mystery not a mystery? When Janet Yellen is puzzling over a lack of inflation, that’s when. So say Brian Wesbury, chief economist, and Robert Stein, deputy chief economist of First Trust, in today’s Outside the Box. The bottom line: QE didn’t work, and Janet knew it was unlikely to work, from the start.

…So forgive us for asking, but after unprecedented expansion of banking reserves and the Fed balance sheet, with little inflation, is it really a “mystery?” Or, is it proof of what we believed all along: QE didn’t work?

…instead of boosting Milton Friedman’s key money number (M2), the excess monetary base growth went into “excess reserves” – money the banks hold as deposits, but don’t lend out. Money in the warehouse (or in this case, credits on a computer) doesn’t boost demand! This is why real GDP and inflation (nominal GDP) never accelerated in line with monetary base growth.

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Posted in BoE, BoJ, Central Banks, ECB, Fed, inflation, Monetary Policy, QE |

BoE votes 7-2 to keep rates on hold, but prepares market for a rise

FT/Chris Giles/09-14-17

The Bank of England has issued its strongest guidance in a decade that it is poised to raise interest rates, setting the stage for a nail-biting decision at the November meeting of the Monetary Policy Committee.

Voting seven to two against an immediate increase in interest rates at the September meeting, a majority of MPC members signalled that unless there is a sudden string of bad economic data “some withdrawal of monetary stimulus is likely to be appropriate over the coming months”.

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Posted in BoE, Central Banks, Monetary Policy |