Bank of england

Wednesday

Jonathan Jones

The Bank of England: no Paul the Octopus

When challenged on the Bank of England’s poor record of economic forecasting by Ed Conway of Sky News this morning, Mervyn King said: ‘This isn’t a spot the ball contest where you’re trying to hit one point on the picture. This is a question of assessing the balance of risks…  We don’t pretend to have a crystal ball to see the future. All we can do is assess the balance of risks. I think this is a reasonable judgment about the balance of risks. It doesn’t say that there will be a recovery. It says that in our central view there will be a recovery, and there are risks on

Isabel Hardman Isabel Hardman

Economy ‘close to zero’

Sir Mervyn King’s sporting jokes are almost as bad as the Bank of England’s ability to publish accurate economic forecasts. As he unveiled the August Inflation Report this morning, the Governor said: ‘Unlike the Olympians who have thrilled us over the past fortnight, our economy has not yet reached full fitness, but it is slowly healing. Many of the conditions necessary for a recovery are in place, and the MPC will continue to do all it can to bring about that recovery. As I have said many times, the recovery and rebalancing of our economy will be a long, slow process. It is to our Olympic team that we should

Isabel Hardman Isabel Hardman

Lower inflation eases the squeeze, for now at least

George Osborne might not be feeling particularly comfortable with today’s August Inflation Report from the Bank of England, as Sir Mervyn King is expected to slash the Bank’s growth forecast for the British economy in 2012 from the 0.8 per cent it predicted in May to close to zero. This morning’s announcement will also include some mildly good news for households, with the Bank due to predict a 2.1 per cent fall in inflation by the end of the year. This will bring inflation down below the two per cent target, which, as the CBI’s Richard Lambert pointed out on the Today programme, will mean ‘families starting to feel a

Friday

Isabel Hardman

More smoke from the Libor fire

A new cache of emails released today by the Bank of England reveal its deputy governor Paul Tucker was warned that it was ‘plausible’ that Libor rates were being ‘influenced by commercial incentives’. Tucker insisted in his appearance before the Treasury Select Committee that he and colleagues ‘thought it was a malfunctioning market, not a dishonest one’. But an email sent by an unnamed official to Mr Tucker on 22 May 2008 points to a possible manipulation of Libor. It contains notes of a meeting which say: ‘There is a long-standing perception that Libor by virtue of the manner in which it is set is open to distortion: panel banks have no obligation to

Tuesday

A Thomson

Libor and what the Bank did and didn’t know

Listening to Mervyn King and his Bank of England deputy Paul Tucker over the past few days, you’d have thought they only found out about Libor manipulation with the rest of us, three weeks ago. Appearing before the Treasury Select Committee this morning, King stated that ‘the first I knew of any alleged wrongdoing was when the report came out two weeks ago’. But documents from the New York Federal Reserve, made public as part of the US Congress’s investigation, suggest that US authorities did know, and tried to warn the Bank of England that manipulation was going on. First, the transcript of a phone call on 11 April 2008 between a Barclays

Saturday

Isabel Hardman

King joins Libor drama

Up to now, Sir Mervyn King has played largely a walk-on part in the Libor scandal, prompting Bob Diamond’s resignation after he warned Barclays that the regulators no longer had confidence in Diamond’s leadership of the bank. Now the Governor of the Bank of England has also been dragged into the drama after email exchanges released by the Bank revealed that he was aware of deliberate misreporting of the rate in June 2008. Timothy Geithner, who was then the president of the Federal Reserve Bank of New York, emailed Sir Mervyn with a list of recommendations for improving Libor, one of which tackles how to ‘eliminate incentive to misreport’. The

Clarissa Tan

Everybody duck! It’s macho Merv

Just as Mervyn King, as Isabel flags in her blog, is being dragged into the Libor scandal, comes a truly remarkable article from the FT headlined ‘The bank that roared’. This bank, in case you are wondering, refers to the Bank of England. The FT says the central bank – led by the good ol’ Governor – is ‘back in charge’ and showing that ‘it means business’. The Old Lady of Threadneedle Street, which in past years had been taking a more ‘laissez-faire’ approach to bank funding and lending, is firmly in the saddle once again. The BoE has a ‘new attitude’ and is now ‘more muscular’. By way of

Thursday

Steve Baker Mp

After LIBOR, why tolerate central banking?

&”Did you encourage them to make up the made up thing to their own advantage?” That’s how one Twitter correspondent paraphrased a question to the Deputy Governor of the Bank.  The LIBOR scandal has exposed the institutions and culture of the City to popular scrutiny as never before.  The population is reacting with justified incredulity to the absurdity it is finding.   LIBOR submissions from Barclays and everyone else were based not on the rate at which they would lend, not on what they actually had to pay to borrow, but on what they said they thought they might have to pay. On the face of it, that is the flakiest

Tuesday

Isabel Hardman

GOD draws near to Bank of England job

Paul Tucker rather drove a steamroller over his hopes to be the next Bank of England Governor during his testimony to the Treasury Select Committee yesterday. We said on Coffee House last night that the suggestion that Tucker and co discussed a possible manipulation of Libor as far back as 2007 had seriously wounded his bid – although Tucker argued that he ‘thought it was a malfunctioning market, not a dishonest one’. Paddy Power agreed that Tucker was in trouble – and has duly lengthened the odds against Tucker getting the job. Before his appearance, he was 6/4, but those odds are now 5/2.  The new favourite for the job, according

Isabel Hardman Isabel Hardman

The Osborne/Balls stalemate

George Osborne and Ed Balls are now locked into something of a staring match over the Libor scandal, with one waiting for the other to flinch. After Paul Tucker’s evidence to the Treasury Select Committee yesterday cleared the Shadow Chancellor and his ministerial colleagues in the Labour government of leaning on the Bank of England, Balls demanded an apology from Osborne for his comments to the Spectator. Andrea Leadsom, one of the members of the committee, saw enough in Tucker’s testimony to publicly call for an apology. This is significant because Leadsom is not the sort of MP who openly briefs against her bosses. She may have a slightly rebellious

Monday

Isabel Hardman

Tucker denies Labour leant on Bank over Libor

So Labour ministers did not ‘lean on’ the Bank of England to encourage lowballing of Libor rates, according to Paul Tucker. The Deputy Governor of the Bank told the Treasury Select Committee this afternoon that he had held conversations with officials about how able Barclays was to fund its operations. This is the exchange between Pat McFadden and Mr Tucker. McFadden asked whether any minister had tried to ‘lean on’ him over Libor: ‘Absolutely not.’ Asked whether Shriti Vadera had leant on him: ‘I don’t think that I spoke to Shriti Vadera throughout this whole process.’ Ed Balls? ‘No’ Other ministers? ‘No’ He confirmed that the ‘senior official’ that he

Isabel Hardman Isabel Hardman

Tucker’s down on his luck

‘This doesn’t look good, Mr Tucker.’ Andrew Tyrie made this observation towards the end of his Treasury Select Committee’s evidence session with Bank of England Deputy Governor Paul Tucker. He was talking about the minutes of a meeting in 2007 which suggested Tucker was aware of the lowballing of Libor, but he might as well have been summing up the witness’s hopes of taking the reins as the Bank’s next Governor. Tucker insisted he was not aware that lowballing was taking place, but the minutes themselves said: ‘Several group members thought that Libor fixings had been lower than actual traded interbank rates through the period of stress.’ John Mann leapt

Tuesday

Clarissa Tan

Meryvn has his case for more QE

Last Thursday Mervyn King said ‘the case for further monetary easing is growing’, and today’s surprise inflation figures give the Governor and his policymakers more leeway to introduce the next round of QE, probably as early as next month. Consumer price inflation fell to 2.8 per cent in May from 3.0 per cent in April, below analysts’ average forecast of a flat reading. It’s the weakest monthly inflation since November 2009, with the main contributors being falling food and oil prices. This is good news indeed, especially given that inflation has been – and still is – eroding savers’ earnings by about 8 per cent over five years. Let’s not

Sunday

The Skimmer

Fisking Peston

How to explain the King-Osborne plan to pump more cheap credit into the economy? Robert Peston gave his explanation of last week’s Mansion House speech. Here, our occasional media correspondent, The Skimmer, gives his thoughts on Peston’s thoughts: Peston: The Bank is saying that, in a business-as-usual way, with no stigma attached and at a cheaper interest rate, it will provide the funds that till now it would only provide through its so-called discount window – which is where banks go to borrow in an embarrassing emergency. The Skimmer: Every other central bank in the world has been doing this as part of normal operations for five years now – this

Tuesday

Peter Hoskin

The IMF says it’s the Bank’s economy now

When the IMF published a report into the UK economy last year, I wrote a blog post detailing how it managed to please everyone: George Osborne, Vince Cable, Mervyn King, Ed Balls, everyone. This morning, I’ve been tempted to just publish that post again — because the IMF’s latest report is basically the same. Osborne will be pleased with its emphasis on deficit reduction, including the line that ‘Strong fiscal consolidation is underway and reducing the high structural deficit over the medium term remains essential.’ And he’ll also want to draw attention to its suggestion that the UK’s weak growth is largely down to ‘transitory commodity price shocks and heightened

Wednesday

Clarissa Tan

Metaphorical Merv

Mervyn King unfurled a mast of metaphors this morning. ‘We are navigating through turbulent waters, with the risk of a storm heading our way from the continent,’ he said. ‘We don’t know when the storm clouds will move away.’ The eurozone, he said, is ‘tearing itself apart’.   So poetic was his language — a rare gift in a central banker — that it almost made one forget the painfully prosaic nature of his facts and figures. Inflation, already at target-busting levels, will be much stronger than the Bank initially envisaged, remaining above 2.5 per cent for the rest of the year. That’s almost a whole percentage point higher than

Thursday

Clarissa Tan

Mervyn’s mini mea culpa

The newspapers and internet today are full of headlines about Mervyn King admitting the Bank of England was ‘late to the game’, and that central bankers should have ‘shouted from the rooftops’ regarding the financial blow-up. It’s true, the BoE governor did make these ‘mea culpa’ remarks — but they came rather half-heartedly, and couched within a radio lecture that seemed to point even more fingers at other parties.   King was giving the Today Programme Lecture 2012, which he addressed to a Radio 4 theatre audience yesterday evening. Early in the half-hour speech, he gave an anecdote from 1997, in which then-governor Eddie George and him, Merv, celebrated Gordon

Fraser Nelson Fraser Nelson

GOD isn’t good enough for Threadneedle Street

When Gus O’Donnell was running the civil service, he was known by his initials — GOD. It seems to have gone to his head. He says in this week’s House magazine that he’s considering applying to be Governor of the Bank of England, and in the same interview exposes his failure to grasp modern economics by saying it would be dangerous to put income tax back to 40p (which was the plan even under Gordon Brown). It is striking that the technocrats like O’Donnell now want to run the show explicitly (as his endorsement of a civil service candidate for Mayor, Siobhan Benita, demonstrates). That Sir Gus is even in

Monday

Clarissa Tan

QE is a government hijack, says King

While Mervyn continues to inflate our universe via Quantitative Easing, another Mr King — Stephen, the chief economist of HSBC — has issued a report saying QE is a way for governments to ‘hijack the credit system’. ‘The financial system is being rigged via acts of financial repression as governments look for new ways of funding excessive debts,’ says King in his bluntly worded report. While he doesn’t cite the UK or Sir Merv by name, it’s clear that reference is being made to QEs I and II, the government’s preferred means of stimulating lending through lowering borrowing costs. Financial repression — basically, when governments fund their borrowing through imposing

Monday

Fraser Nelson

Yes to new roads, no to a pensions raid

New roads in Britain are badly-needed, but who should bear the costs? Motorists, says David Cameron — and his speech today is a move in the right direction. No tolls would be slapped on existing roads, so motorists are free to drive as freely as they do now. But if they want a shortcut, they’ll have to pay for it. What I’m uneasy about is Cameron trying to raid our pension funds to help subsidise this. There are many ways to raid pension funds — QE is one. The National Association of Pension Funds estimates that a scandalous £130 billion has been wiped from the value of our collective pensions