UK News
Insights from the UK and beyond
from Breakingviews:
Carney in doesn’t mean pound down as QE heads out
By Ian Campbell
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Is Mark Carney really Mr. Easy Money, about to devalue the pound in a bid for growth? The incoming head of the Bank of England has spoken of the need to attain “escape velocity”. But the logical deduction - that he will open the monetary floodgates and send the pound down to $1.40 - ignores the latest economic news and the new international mood on monetary policy.
The case against the pound starts with weak British GDP growth. But the economy is picking up. Overall consumer expenditure grew by 1.3 percent year-on-year in May according to Markit, the best annual rise since October 2010. Positive surveys of construction and manufacturing, as well as the dominant services sector, suggest growth is broadening. Second quarter GDP could increase more than the first quarter’s 0.3 percent rise.
The first step to weaker sterling would be a vote by the central bank’s Monetary Policy Committee in favour of more quantitative easing. But Carney replaces Mervyn King, whose proposal for increased QE has been consistently outvoted by a 6- to-3 margin. Carney might have dominated the Bank of Canada, where he was governor, but relatively good economic news will stiffen resistance at the British MPC.
from The Great Debate:
Stubborn national politics drag down the global economy
Four years ago world leaders, meeting in the G20 crisis session, agreed they would all work to move from recession to growth and prosperity. They agreed to a global growth compact to be delivered by combining national growth targets with coordinated global interventions. It didn’t happen. After the $1 trillion stimulus of 2009, fiscal consolidation became the established order of the day, and so year after year millions have continued to endure unemployment and lower living standards.
Only now are there signs that the long-overdue shift in national macro-economic policies may be taking place. The new Japanese government is backing up a "minimum inflation target" with a multi-billion-dollar stimulus designed to create 600,000 jobs. In what some call the “reverse Volcker moment,” Ben Bernanke has become the first head of a central bank for decades to announce he will target a 6 percent level of unemployment alongside his inflation objective. And the new governor of the Bank of England, Mark Carney, has told us that "when policy rates are stuck at the zero lower bound, there could not be a more favorable case for Nominal GDP targeting.” Side by side with this shift in policy, in every area but the Euro, there is also policy progress in China. It may look from the outside as if November’s Communist Party Congress simply re-announced their all-too-familiar but undelivered wish to re-balance the economy from exports to domestic consumption, but this time the promise has been accompanied by a time-specific commitment: to double average domestic income per head by 2020.
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 The Great Debate UK:
Bank hedges bets with QE expansion
When the Bank of England decided to expand its quantitative easing policy by 25 billion pounds to 200 billion on Thursday, it was essentially hedging its bets.
After Britain's economy shrank unexpectedly in the third quarter, and with two thirds of the City expecting an expansion to the QE programme, simply shutting off the tap of government bond purchases would risk being more of a shock than the economy could bear.
Is a 1.8 percent inflation rate good or bad news?
- Sumeet Desai, Reuters senior UK economics correspondent. -
Inflation unexpectedly held steady in July, official data showed Tuesday, but economists still expect big falls in the annual rate this year and monetary policy to stay loose for some time to come.
Is a 1.8 percent inflation rate good or bad news?
What other options does the Bank have?
Interest rates have been cut again – to a record low of 1.5 percent. As they get ever closer to zero, the impact of rate cuts will become more and more limited. So what can central banks do to ease the economic pain?
“Quantitative easing”, or what non-economists call “turning on the printing press” is one of the options.
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The Wall
