Comment, analysis and other offerings from Friday’s FT,
Editorial comment: Shock treatment
The Bank of England’s monetary policy committee showed courage on Thursday by cutting the key interest rate by 1.5 percentage points to 3.0 per cent. It was a bold move, and the right one, taking markets by surprise. Extraordinary events over recent weeks require extraordinary policy responses.
Samuel Brittan: This ‘bold’ cut is barely adequate
Those whose economic experience has been confined to the decade or so of steady growth and low inflation in the UK and the eurozone might be surprised to find me saying that the “bold” 1.5 percentage point cut in official interest rates announced by the Bank of England is barely adequate and will probably need to be followed by further cuts soon. Official interest rates have in this period normally moved by a quarter percentage point at a time, with even half a point regarded as exceptional. But these are not normal times.
Martin Wolf: Why the MPC must be congratulated
Sometimes boldness is caution. The Bank of England’s monetary policy committee has, in extreme circumstances, adopted the “risk management” approach followed by Alan Greenspan and Ben Bernanke at the US Federal Reserve. It was right to do so.
Short view: All things far from equal
All other things being equal, when a central bank cuts interest rates, it damages its home country’s currency. With rates lower, there is less incentive to leave money in that currency. It should also be great for stocks, as companies can borrow more cheaply. But all other things are far from equal. And so it was that a cut of 1.5 percentage points by the Bank of England, the biggest in its history as an independent institution, bringing British rates below those of the eurozone for the first time since the euro was created, helped to push sterling up.
Editorial comment: Obama’s victory; a change the world should believe in
The world looks anew at its sole superpower. For the past several years America’s most formidable adversary has not been al-Qaeda, North Korea or Iran. The strategic threat to US power has come from rising anti-Americanism. The election of Barack Obama has disarmed it.
Opinion: The secret to retail banking – real people in charge
Christopher Johnson, former chief economic adviser to a London clearing back, writes: The global banking crisis has given rise to a Manichaean view of banking – retail banking good, investment banking bad. Yet it was not so long ago that public anger was directed against the banks for the way in which they ran their domestic retail operations; underpaying, overcharging, excess profits, lack of competition. In the authorities’ view, these banks had to make big profits to survive shocks and to give the Treasury supercharged tax revenues.
Lombard: Heroes wanted to stave off the next financial crisis
A day when many are hailing the Bank of England for its heroic cut in interest rates should be a good one on which to advertise for non-executive directors to oversee the country’s central banking heroes.
Gideon Rachman: A Polish missile crisis?
During the presidential election campaign Joe Biden warned rather injudiciously that world leaders would test Barack Obama’s mettle within six months of him taking office. Well, it doesn’t seem to have taken them that long. On the very day of Obama’s election, the Russian government announced plans to deploy cruise missiles in Kaliningrad, a tiny Russian enclave that borders Poland.
Lex on American cars
America’s love affair with the automobile has reached such a level that there is now one car on the road for every person old enough to drive. This statistic may well come to haunt Detroit’s struggling carmakers.