The Great Debate UK

from The Great Debate:

Real commodity prices and the U.S. rate cycle

February 10, 2010

-- John Kemp is a Reuters columnist. The views expressed are his own. --

Commodity prices exhibit a strong cyclical component -- though it can be masked when producers are carrying a lot of excess capacity.

Little chance of a rate hike until at least Q3

January 23, 2010

cr_mega_503_JaneFoley.JPG-Jane Foley is research director at Forex.com. The opinions expressed are her own. -

You never know when rates will rise

October 8, 2009

David Kuo-David Kuo, Director at the financial website The Motley Fool. The opinions expressed are his own.-

from Commentaries:

Bernanke: Back to Clark Kent

By Christopher Swann
August 11, 2009

Having averted a disaster, cartoon superheroes typically revert to their bland civilian identities. With the recession loosening its grip, Ben Bernanke is trying a similar trick.

from The Great Debate:

BoE extends QE, fears 1930s re-run

August 6, 2009

John Kemp

-- John Kemp is a Reuters columnist. The views expressed are his own --

The Bank of England's decision to continue with its asset purchase programme, or quantitative easing (QE), at the rate of 50 billion pounds per quarter in Oct-Dec, unchanged from Jul-Sep, shows bank officials are more worried about ending support for the recovery too soon than about risking inflation by leaving it too late.

Savers must start becoming investors

May 8, 2009

david-kuo_motley-foolthumbnail- David Kuo is director at The Motley Fool. The opinions expressed are his own. -

Pensioners feel pinch from low rates

May 8, 2009

rtrt8h- Sharon Bratley is chartered financial planner at Fair Investment. The opinions expressed are her own. -

Bank of England faces dilemma on QE extension

April 9, 2009

johnkemp– John Kemp is a Reuters columnist. The views expressed are his own –

LONDON, April 9 (Reuters) – The Bank of England’s terse press statement announcing it will maintain overnight rates at 0.5 percent and continue the existing 75 billion pound quantitative easing (QE) programme gives no clue about whether the Bank intends to extend the programme when the first tranche of asset purchases are completed in June.
But officials will have to make a decision soon: unless they signal a commitment to extend QE, gilt yields will rise even further in anticipation that the major buyer in the market will withdraw.
The QE programme is dogged by ambiguity about its objectives (which a cynical observer might conclude is deliberate).
Officially, the aim is to prevent inflation falling below target by accelerating money supply growth, not manipulate the yield curve for government and corporate debt.
In this, the Bank’s avowed strategy is more conventional than the Fed’s ambitious efforts to determine the cost of credit for borrowers throughout the economy. It is a straightforward quantitative easing patterned on the Bank of Japan, rather than a credit easing patterned on the Fed.
If true, the measure of success is how much the money supply has been boosted at the end of the three month period; the Bank should be indifferent about whether ending QE causes yields and borrowing costs to rise.
So long as money supply has risen consistent with the inflation target, and the Bank can discern some green shoots of stabilisation if not recovery, officials can declare victory, end the programme, and keep the other 75 billion pounds of asset purchases authorised by the chancellor in reserve. Yields can be left to find their natural level.
But many suspect the Bank’s real objective is yield control — in which case it will have to announce another round of buy backs of gilts and corporate bonds in good time, well before the current programme is completed, to shape market expectations.
The results of the existing round have been unimpressive.
After falling initially, gilt yields are almost back up to the level they were at before the Bank’s foray into unconventional monetary policy.
The snag is that if the Bank stops buying, other investors will struggle to absorb all the new government paper on offer without a major increase in yield — pushing up borrowing costs for everyone, precisely what the Bank has sought to avoid.
The Bank’s dilemma is whether to push on (heightening fears about inflation) or call a halt (risking a spike in yields all the same).
Either way, the Bank needs to give the market, as well as the Treasury and the Debt Management Office, plenty of warning about its intentions.
(Editing by Richard Hubbard)

Quantitative easing a last resort

April 9, 2009

img_3391-alan-clarke-Alan Clarke is UK economist at BNP Paribas. The opinions expressed are his own-

As expected, the Bank of England left the Bank Rate unchanged at 0.5 percent at the April meeting, the first unchanged decision since September 2008.