The Bank of England’s response to the uncomfortable dilemma of stagflation will be a key test of its credibility The Bank of England faces an uncomfortable time over the next couple of years, if its latest forecasts turn out to be broadly correct. The latest projections in the Bank’s Inflation Report published yesterday show that inflation will be pushed up by the fall in the pound and is likely to remain above the 2 per [...]
After a torrid time for sterling, is the UK economy heading for trouble? Andrew Sentance, senior economic adviser to PwC and former member of the Bank of England’s MPC, says Yes. It is not just Brexit which is undermining sterling at present. The UK has a large balance of payments deficit. The government still has a large deficit – and Philip Hammond seems more relaxed than George Osborne about [...]
As recession fears fade following strong services PMIs, was the Bank of England wrong to cut interest rates post-Brexit? Andrew Sentance, senior economic adviser to PwC and a former member of the Bank’s Monetary Policy Committee, says Yes. Very low interest rates have been with us since 2009, but the Bank of England’s latest stimulus package has had a dramatic impact on long-term investment returns. Twenty-year UK government bond yields are now just over 1 [...]
With inflation expected to hit 3 per cent in 2017, is the Bank of England right to prioritise growth over price stability? August 16, 2016 Martin Beck, senior economic adviser to the EY Item Club, says Yes. In light of the sharp post-referendum drop in the value of the pound, prices of imported goods are set to increase. As a result, inflation will rise over the next year. As our forecast suggests, CPI inflation is expected to peak at around 3 [...]
As the Bank cuts interest rates and restarts bond purchases, will it succeed in stimulating the economy? August 4, 2016 Dean Turner, UK economist at UBS Wealth Management, says Yes. With the threat of a sharp slowdown looming, the pre-emptive strike by the Bank of England with a comprehensive package of easing measures, should ease the pain. The measures were more than the markets were anticipating, as was the signal that the Bank stands ready to [...]
Fewer MPC meetings? The Bank’s new plans are likely to backfire December 11, 2014 Yesterday, the Bank of England’s Monetary Policy Committee (MPC) announced a wide-ranging package of reforms to its meetings, processes and communications. The objective is sound – to enhance accountability and transparency. The proposals build on a report by Kevin Warsh, a former US Federal Reserve governor. His report was triggered by concerns that records of [...]
The chancellor’s balancing act has set the tone for tight fiscal restraint in the next Parliament December 3, 2014 DESPITE higher short-term borrowing, the chancellor presented an Autumn Statement in which the deficit is back on track over the medium term and a surplus is achieved by the end of the next Parliament. At the same time, he announced some selective tax reductions aimed at helping individuals and smaller businesses, while making commitments earlier [...]
The sorry tale of forward guidance August 13, 2014 What remains of the Bank of England’s policy of forward guidance, launched just a year ago? In the light of yesterday’s Inflation Report, the answer has to be “not much”. The value of guidance from a central bank should be to provide a consistent and reliable indication of how it is thinking about its decisions [...]
The real world looks much less rosy than the Bank of England’s forecasts May 14, 2014 YESTERDAY’S Inflation Report presented a benign view of UK economic prospects. Economic growth is expected to continue at around 3 per cent or above, double the rate over the recovery so far. Yet sufficient spare capacity remains to prevent a rise in inflation. So interest rates can rise gradually and that can wait until next [...]
