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’Mervyn readies his pen
From Reuters on Tuesday:
LONDON, Jan 19 (Reuters) – British consumer price inflation rose at its fastest annual pace in nine months in December as a cut in value added sales tax, heavy discounting and a sharp fall in oil prices at the end of 2008 were not repeated in 2009,
Mervyn King’s bank deposit slap down
Yowch!
Remember the hooplah over UK banks hoarding all that lovely QE money instead of passing it into the banking system? Well, the BoE’s Mervyn King said on Tuesday that he was ready to reduce the rate paid on deposits held at the central bank — a la the Swedish example — to make them lend.
How to deal with bank hoarding
QE galore in the UK, and yet banks are reportedly still failing to pass on the extra liquidity. A recent report by Investec pointed out commercial banks were holding some £138bn on account at the Bank of England.
Prudent decisions in central banking, revisited
We were yesterday reminded of the true Golden Era in central banking, circa 2006. A time when, freed from the dull chore that was setting interest rates, the main pressures on a Bank of England employee’s schedule were questions such as:
The Lord is my central banker, I shall not want…
Via Alea:
The Bank (of England) finds itself in a position rather like that of a church whose congregation attends weddings and burials but ignores the sermons in between. Like the church, we cannot promise that bad things won’t happen to our flock – the prevention of all financial crises is in neither our nor anyone else’s power,
Who’s not bothered about inflation?
Here’s a nice graphic from the Bank of England’s recently released handbook on the “State of the art of inflation targeting”:
Notice any substantial central bank missing from the chart? If you’re having trouble clocking it,
Mervyn’s FA-style
We can’t remember the last time Mervyn King, governor of the Bank of England did an interview with a leading UK newspaper, wire or broadcaster — outside of official conferences that is.
But he does talk.
The need for greater realism in monetary policy
Is it ironic that the following conclusion is coming out of the Bank of England?
(Emphasis FT Alphaville’s):
. . . What lessons might be drawn for the operation of monetary policy? As we have argued,
QE and expectation management from the BoE
Minutes from the Bank of England’s last policy meeting – where a £50bn expansion of the existing £75bn quantitative easing plan was decided upon – have just been released.
And they reveal a not inconsiderable degree of uncertainty.
BoE sees inflation swinging both ways
The Bank of England’s latest inflation is out and the top line is that the Bank sees inflation just above 1 per cent in 2 years time and the economy shrinking sharply in the coming months before recovering at a slower pace than previously thought.
The ‘QE’ stockmarket effect
On paper, the Fed and Bank of England initiated quantitative easing policies to try and keep long-term yields down and to boost the level of aggregate banking sector reserves so as to encourage bank lending.
BoE expands QE
Bank of England Maintains Bank Rate at 0.5% and Increases Size of Asset Purchase Programme by £50 Billion to £125 Billion
Statement in full here.
The Committee also agreed to continue with its programme of purchases of government and corporate debt financed by the issuance of central bank reserves and to increase its size by £50 billion to a total of £125 billion.
Alors! Je voudrais un Sterling
Here’s an intraday graph for cable, which earlier today was looking a little bit err, wan, to say the least:
Something clearly happened at around noon.We’re thinking… French tourists?
14:06 RTRS- STERLING REBOUND SAID TO BE ON CENTRAL BANK BUYING – TRADERS
So anyway,
Budget: Gilt market reaction
A bit of a mixed reaction in the UK government bond market to the budget.
Midday, as the chancellor’s budget speech began, gilt prices rose seemingly in unison, but gains were swiftly reversed barely half an our later.
Received at her majesty’s pleasure
So why would the Queen hold an audience with Mervyn King for the first time ever since she came to the throne 57 years ago? Does Mervyn have some gilty confessions to make?
Here’s our suggestion:
Gilt auction failure begins
Oh dear. Wednesday’s £1,750m auction of 4¼ per cent Treasury gilts dated 2049 failed, with a bid-to-cover ratio of 0.93.
That’s the first UK conventional gilt auction failure since 1995 according to Dow Jones.
Failing the stress test; or, in the long run, we’re all dead
Earlier this week, Andrew Haldane, the Bank of England’s director for financial stability gave a speech to the Marcus-Evans Conference on stress testing.
While that doesn’t exactly sound particularly enticing,
Trial of the Pyx
Since the twelfth century, the coinage of the realm has been assayed in an arcane ritual known as the Trial of the Pyx.
Every February for the past 800-odd years, a delegation from the Royal Mint, under armed guard,
Notes on the BoE’s asset purchase scheme – fighting Mr Market
Details out this afternoon of the BoE’s asset purchase facility:
The Bank has been authorised to purchase up to £50bn of high-quality private sector assets under this Facility. The following sterling assets are initially eligible for purchase:
In defence of sterling
Sterling continues its daily plunge:
Ever contrarian, we here at FT Alphaville feel it is therefore our intrinsic duty to put forward the case for the UK’s beleaguered currency.
For one, the position of sterling as a global reserve currency must be considered.
A moderating MPC?
The minutes from the Bank of England’s Monetary Policy Committee’s January meeting are out, and shock, horror — they considered not cutting rates at all.
Some arguments could be made for leaving Bank Rate unchanged.
BoE becomes the bad bank?
In case the full Treasury statement is a bit much, here are some highlights of ‘ UK bailout 2′ (our emphasis):
- UK GOVT SAYS TO OFFER PROTECTION TO UK INCORPORATED AUTHORISED
DEPOSIT-TAKERS (INCLUDING
Quantitative easing in the UK
It has hit. Quantitative easing has finally been discovered by the mainstream press in the UK.
Or at least, it’s finally been acknowledged as the logical next policy step from the Bank of England as rates approach zero.
BoE slashes rates: 100bps
From the BoE, emphasis ours:
The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 1.0 percentage points to 2.0%.
In the United Kingdom,
‘Rate-cut Thursday’ begins
This from Sweden’s Riksbank:
INSTANT VIEW 1-Swedish cbank slashes rates record 175 bp
STOCKHOLM, Dec 4 (Reuters) – Sweden’s central bank slashed its key interest rate by a record 175 basis points to 2.00 percent on Thursday,
Prsh-dum Prsh-dum Prsh-dum
That’s meant to be the sound of a printing press, by the way. Former Treasury adviser Gavyn Davies ponders the possibility of Britain turning on the money taps in a piece in the Guardian today.
It’s called “We must start thinking like South American dictators.”
Mervyn’s fan
The BoE’s Inflation Report is out and Mervyn King is making an appearance to explain himself.
Of interest, particularly, is King’s reference to the broadening shape of its CPI fan chart:
A note on how fan charts work from the BoE:
Banking on a mega cut
Expectations are mounting that the Bank of England may deliver as much as a 1 per cent cut when it announces the outcome of its monthly monetary policy meeting today. 50 basis points is seen as an absolute minimum.