UK News
Insights from the UK and beyond
from Anatole Kaletsky:
Britain’s two cheers for Carney
When Mark Carney, the respected head of Canada’s central bank, was appointed on Monday to the even more august position of governor of the Bank of England, Britain’s reaction was a characteristic blend of self-deprecation and smugness.
The self-deprecation was publicly expressed by an Opposition MP, Barry Sheerman: “Isn’t it a little surprising that the leading banking nation on earth could not find a British candidate for the job?” This feeling of mild embarrassment seemed to be quietly shared by many Britons in addition to the distinguished domestic candidates who were passed over.
The smugness has been much more in evidence. There has been a veritable orgy of self-congratulation among British politicians, media commentators and financiers at having nabbed “the outstanding central banker of his generation,” as George Osborne, the British chancellor, described his new hire. Embarrassment and praise are both justified, but for other reasons.
Starting with the embarrassment, there was actually no shortage of outstanding British candidates to run the BoE. All four Britons who publicly revealed their interest - Adair Turner, Paul Tucker, Terry Burns and John Vickers – have credentials that easily match Carney’s and would have put them in the top league of global central bankers alongside Ben Bernanke and Mario Draghi. This appointment, therefore, was definitely not an example of the “Wimbledon syndrome,” whereby Britain hosts the world’s best tennis tournament but never produces a player who is good enough to win.
from MacroScope:
There be feudin’ at the BoE
The once-good relationship between Bank of England Governor Mervyn King and his most likely successor, Deputy Governor Paul Tucker, is coming under increasing strain, according to a new book by former Daily Telegraph journalist Dan Conaghan. It alleges King’s management style and and alleged disdain for the financial markets is to blame.
While the Bank of England’s Monetary Policy Committee remains reasonably collegiate, on other matters King more than lives up to the description from former chancellor Alistair Darling that he is ‘incredibly stubborn’, says Conaghan, who now worksas an asset manager.
from Breakingviews:
UK banks need government to solve funding squeeze
By George Hay
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.The Bank of England is tooling itself up. The UK central bank announced on Dec. 6 a new facility to help domestic lenders if the euro zone crisis causes a fully-fledged freeze in short-term funding markets. But banks may still need more help.
The BoE already has two ways to combat liquidity squeezes. It allows banks to borrow against liquid collateral for three or six months through its Indexed Long-Term Repo (ILTR) auctions. And it allows desperate banks to swap illiquid collateral for gilts for up to a year via its Discount Window Facility (DWF) – in return for a fat fee and big haircuts.
from James Saft:
Britain eats (leverages) its young
James Saft is a Reuters columnist. The opinions expressed are his own.
Four years, several failed banks and at least one global recession later, Britain has finally discovered what its young people need: 19-1 leverage.
Britain has announced a new housing initiative, the centerpiece of which is a plan to entice first-time buyers into buying newly-built properties with as little as 5 percent down.
from Breakingviews:
Becalmed UK in danger of double dip
By Ian Campbell
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The UK economy looks dangerously becalmed. While GDP did increase a good-looking 0.5 percent in the third quarter, the number was flattered by a catch up from a royal wedding-distracted spring. Besides, there has only been a 0.5 percent rise over the full year. And now a euro zone storm is brewing. That Tuesday's UK manufacturing survey for October dropped to the lowest level for over two years is no coincidence -- but is alarming.
from Breakingviews:
UK will get QE2 – but may need fiscal help too
The odds are moving rapidly towards a launch of QE2 in the UK. A second bout of quantitative easing - printing money - would be controversial. But a fragile economy needs extreme treatment - monetarily, and probably fiscally, too.
Britain's substantial home-grown problems are being exacerbated by crisis in the euro zone. UK unemployment crossed 2.5 million in the three months to July. Activity in services, the bulk of the economy, almost contracted in August. Wages, up just 1.7 percent in the past year, are falling fast in real terms, impoverishing consumers and threatening deflation. And exports are stalling: the euro zone is the UK's main trade partner.
from MacroScope:
BoE rate decision has echoes of Jan 2007
By Sumanta Dey in Bangalore
The BoE is expected to keep rates on hold at its monthly meeting today. Sixty-two out of 63 economists polled by Reuters expect such an outcome. Statistically speaking, that is more than a fair majority. But are we in for another upset like the one more than four years back? At that time, Simon Ward of Henderson Global Investors was the only economist correctly calling a rate hike.
There are a number of spooky similarities today that point to an almost identical scenario.
from MacroScope:
Broadbent’s BoE appointment keeps hawks in health
Ben Broadbent’s appointment to the Monetary Policy Committee ought to dispel any notions that the Bank of England would be left short of hawks after the departure of Andrew Sentance.
A brief look at the history of Reuters polls shows that Goldman Sachs' UK economists – led by Broadbent – were uber-hawkish in their outlook for British interest rates early last year.
Britons face rising price pain
– Fiona Shaikh is Reuters’ Economic Correspondent, based in London. –
Stubbornly high inflation has proved something of an inconvenience for the Bank of England over the last year, but the unrelenting rise in prices is turning out to be a real headache for ordinary Britons — one which is likely to get worse before it gets any better.
from MacroScope:
The perils of predicting BoE policy
As we’ve noted extensively, economists often get it wrong. Leaving aside their collective failure to recognise an impending global recession, you might recall a shock interest rate hike from the Bank of England in January 2007.
This was another event that almost every economist polled by Reuters failed to spot, and there are signs that four years on, economists might be setting themselves up for a similar shock.
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The Wall
