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BoE should have raised rates more than 0.5% on 20 Sept

Two things about this error are interesting:

Firstly nobody is picking up on it sufficiently and giving it the weight it deserves in terms of explaining why the BoE later needed to step in to the gilt markets (28/9). We are told this is because of the tax cuts announcement, but we are not told that a more substantial contributory factor was the failure to only raise interest rates by 0.5%.

Secondly as a result of the first failing, the blame is all being placed with the government for the tax cuts, and no blame is being attributed to the BoE, which is completely wrong (and dangerous). 

Nationalise the Bank of England and do it as soon as possible. 

There is some truth to the OP.  The BoE should have raised rates by at least 0.75% not 0.50%, particularly in light of rate rises in US and Euro in the days preceding the BoE decision.  However, to be fair, almost half the MPC did vote for a 0.75% increase.  It was defeated only because those on the MPC who are not from Britain voted against it.  I'm an immigrant and I've never agreed with putting people from abroad on the MPC.

No on 20 September 2022, the Bank of England raised rates by 0.5%

Around that time (day or two earlier I understand) in the US rates were raised by 0.75%

The BoE should have raised rates by at least 0.75% - at least

Well said Rob Cannon

lets keep saying this until somebody listens

Nationalise the BoE and do it as soon as possible 

What on earth are you talking about? The BOE was nationalised in 1946 for fvcks sake.

Do you mean take away the bank's independence on rate setting?

You can call it what you like Donny Darko

If it makes you happy to achieve victory because the correct action is to take away the BoE independence on rate setting then that's really amazing

The government should set rates. Gordon Brown's reforms should be entirely reversed. I think those reforms were in 1997 but I could also be incorrect about that. 

I think they probably should have gone to 0.75% but the suggestion the 0.25% difference has caused the run on the pound and jump in gilt interest rates is nonsense

those problems have been caused by the govt's decision to fund tax cuts by borrowing without any independent analysis of the consequences 

The first post is moronic. Kwartit was determined to play the idiot and not tell anyone what he was up to. For all Bailey’s failings, not anticipating total stupidity from a chancellor is not one of them.

The BoE should a) not have cut into COVID and b) stopped reinvesting QE money and flagged rate rises back up to 2% in April last year. They missed the boat and were raising into a massive decline in money supply ie rate rises were the last thing the economy needed before Truss the twot blew up the pipeline.

if nationalising the BoE leaves it in the hands of deluded frothers like the OP then it stays where it is and we just try to find a governor prepared to do the right thing (which is not what the OP suggests) even if unpopular.

All of what is happening now is on the current administration, compounding 12 years of investment failure in preference for keeping boomers as wealthy as possible. 

I think they should have gone up by 1% (or more)

You can say that this is excellent with the benefit of hindsight but it's not my responsibility to set these things

The point actually is that currently pretty much 100% of the blame is being attributed to the government.  Until there is proper recognition that the BoE is also to blame (in my opinion more to blame, but that's just me), then no fair assessment can be concluded. 

In the meantime withdraw the BoE's independence on rate setting, and do it as soon as possible. 

You are calling me a frother simply because I disagree with you and your opinion fits with the cosy consensus so that empowers you to be use inflammatory language 

IT IS CLEAR TO ME THAT WHAT WILL CALM THE MARKETS AND RESTORE CONFIDENCE IS THE BANK OF ENGLAND BEING PUT INTO THE HANDS OF LIZ TRUSS AND KWASI KWARTENG

The BoE are slow and weak but not doing anything massively out of the ordinary.

For all their whining, the govt are like a golf foursomes player. No matter how much shit your predecessor got you into, your job is to do the best job with the hand you’ve been dealt.

Instead these idiots have taken the advice of loony ivory tower dwelling “grandees” like Redwood and Mogg and “alternative” economists and played yet another experiment on people who need money for the gas bill on Friday. If you want some sort of economic Petri dish fook off somewhere else and stop fooking the 67% that you are supposed to represent that didn’t want to be here in the first place and don’t need some aunts that have taxed them to the hilt, underfunded education and health for a decade and generally broken Britain. 

I WOULD ALSO BE HAPPY WITH REDWOOD AND MOGG BEING HANDED THE BANK OF ENGLAND AS - I HAVE EVERY CONFIDENCE - WOULD THE MARKETS

It is necessary to fix the slowness and the weakness so withdraw the BoE's independence on rate setting, and do it as soon as possible. 

This should be good news for you guys - two things will follow that (1) however short a period has gone by at that point since you've got your hate on about the government means you can freshen that up for taking that decision and (2) it really will be all the government's fault then

clear / clean

simples

You are calling for the BoE to be nationalised because people that clearly lean the way you do politically based on your posts have screwed the country. We’ve had 6 years of deluded fookers telling us to stop moaning while THEY steered the ship straight for the iceberg, so they can fook off with false flag BS like the first post and own this latest round of self-harm.

If you want some sort of economic Petri dish fook off somewhere else and stop fooking the 67% that you are supposed to represent that didn’t want to be here in the first place and don’t need some aunts that have taxed them to the hilt, underfunded education and health for a decade and generally broken Britain. 
 

Bang on. The “experimental”/“it’s a gamble” approach is fooking idiotic. I didn’t consent to be part of a nationwide experiment into whether doing really stupid things actually helps

And as BB suggests, the idea that “nationalising” (removing the independence of) the BoE would improve confidence at this juncture is absolutely pants-on-head moronic

you think the markets would like responsibility for setting interest rates to be transferred back to the chancellor of the exchquer?

bananaman so 14 years of printing money (QE)

and an escalation of QE since March 2020 (including yesterday)

that's absolutely fine with you is it - because experts

experts?? REALLY???

QE benefits rich people and screws poor people - but I don't need to tell you that as you know it full well 

Also fook off with “you guys” polarising BS. Cameron and Osborne fooked the country by withdrawing public demand at the same time as private, setting up a generation of school children for underachievement, an NHS unfit to cope with a pandemic and subsequent fallout, and stagnant real wages and low growth for a decade.

They then delegated a massive socio-economic decision to get UKIP votes.

The frother wing of the Tories then insisted on getting the worst deal possible, worse than their own leader negotiated, taking 4% off GDP and encouraging European businesses to invest elsewhere. They have now installed pure believers as PM and chancellor and got exactly what they wanted, but continue to run the “if only their aunt had balls they’d be their uncle” defence when, as predicted by rational people of all political persuasions, it would be a disaster.

So the patience of everyone other than privileged public school boy tits financially insulated from it all has run out. So once again, with feeling, fook off you frother and own this shit your leaders have created.

 

Got to love the instinct to blame someone else. I thought Tories were meant to be all about taking responsibility 

apparently BoE independence means printing money

(ok they held back from that in the first decade - finding their feet no doubt)

to the extent that there are any neutral voters who haven't got to grips with all this hear this

Everything Labour does is with a view to removing everything important from democracy so that it's out of the hands of people who are accountable to the electorate and flows with everything to the river that leads to the end of the nation state entirely

The lolz puppet has been wheeled out by someone too ashamed to post this drivel under their usual name. 

Who could it be?

Got to love the instinct to blame someone else. I thought Tories were meant to be all about taking responsibility 

WE CERTAINLY ARE ABOUT TAKING RESPONSIBILITY AND THE SOONER SIR BEER DOES THE BETTER!!

Everything Labour does is with a view to removing everything important from democracy so that it's out of the hands of people who are accountable to the electorate
 

🤡

I CALL UPON THE BANK OF ENGLAND AND SIR BEER TO TAKE FULL RESPONSIBILITY FOR ALL THE BAD THINGS!!

BECAUSE I SINCERELY AND GENUINELY BELIEVE IN ACCOUNTABILITY AND TAKING RESPONSIBILITY FOR ONE'S ACTIONS!!

Careful what you wish for.  Doubt the Bank would have intervened in time yesterday if it was subject to direct control of the executive.

Brown gave the BoE independence to increase its credibility in the markets. That worked for decades. You now say withdraw the BoE's independence and give it over to a Chancellor who has lost credibility in the markets.

Labour's Brown gave the BoE independence so that was one less important thing that the government of the UK was responsible for

Labour are now trying to claim that the government have responsibility for the failings of the BoE on monetary policy

lolz is another bradders/thefish/iamthesucker/playftse4me sock puppet

 

it is just so wonderful and satisfying 2 witness the ever more painful and incoherent mental gymnastics that tozza brexters r being 4ced 2 undertake 2 maintain their belief that it just isn’t their fault

Labour are now trying to claim that the government have responsibility for the failings of the BoE on monetary policy

DOES LABOUR REALLY THINK FOR ONE INSTANT THAT THEIR PATHETIC ATTEMPTS TO BLAME THE GOVERNMENT ARE GOING TO WORK WITH ANYONE OTHER THAN THE MOST SWIVEL EYED LABOUR SUPPORTERS WHEN WE CAN ALL SEE AS CLEAR AS DAY THAT THIS IS ALL SIR BEER'S FAULT?!?

IT WOULD BE LAUGHABLE IF IT WASN'T SO UTTERLY TRAGIC!!

#FIZZWITHLIZ

At least i've been schooled on economics reading this thread. It seems that had we still been in the EU and the FED setting their interest rates now from 3%-3.25% vs boe 2.25%. the £ would have appreciated vs the $ not declined (obviously the assumption here is kwasi didn't go full on idiot mode)

if what you're saying is that in the UK interest rates should currently be a whole load higher than 2.25% then you're absolutely right

if what you're saying is that in the UK interest rates should currently be a whole load higher than 2.25% then you're absolutely right

no no far from it. As I mentioned in my post. I've been schooled that being in the EU AND having 1% lower rate than the FED is fantastic news for the exchange rates. The £ would be appreciating vs $ at this very moment (minus kwasis madness).

 

my biggest disappointment is us crashing out of the ERM and therefore not joining the €. We could have lost $ parity far sooner :(

yeah sure - a cheap pound is good for exports

I can send you an economics text book nutshells kind of thing if that will help cheers

oh right and imports become more expensive (reduction in imports and increase of exports)?

Wouldn't that mean the balance of trade would improve (we're in a deficit). If we had a surplus in our balance of trade would that also cause the £ to devalue?

The BOE is somewhat in a difficult position. Brexit has severely damaged the UK economy, to the brink of recession. This has weaked the pound leading to increased imported inflation. Raising interest rates would take money out of the system, reducing inflation, sadly likely to hasten the recessive direction. 

America has a very strong currency, very strong economy, very very strong job market. The Fed has more wriggle room to play with interest rates. 

Comparing the American response to the British response is not sensible. 

In short. Brexit is a problem we will have to deal with. Hence my move to Germany. 

Raising interest rates would take money out of the system, reducing inflation, sadly likely to hasten the recessive direction. 

14 years of QE hasn't caused any extra money to enter the system at all. no siree

The BoE would make its position a whole lot less difficult if it increased rates to a level much higher than they currently are

Whilst they are there they need to stop seeing printing money as the solution to everything in the short term

it's not their money for one

The BoE would make its position a whole lot less difficult if it increased rates to a level much higher than they currently are

Whilst they are there they need to stop seeing printing money as the solution to everything in the short term

it's not their money for one

what could possibly go wrong keeping rates at 0.5% for a decade laugh

ultra low interest rates for a very long time coupled with printing money throughout that whole period was of course disastrous

the real chronological point of failure by the BoE was in early 2021.  At that point they were advised by economists that inflation was likely to rise (as it has done) and that they needed to slowly tighten monetary policy and increase rates. Instead the BoE did the opposite. Rates did not start to increase until 20 Dec 2021 and during 2021 instead of tightening monetary policy they loosened it by not only increasing money printing (QE) a bit but by increasing it a lot (record highs of QE during that period - like a lot more)...

It was mental that they put the decision back by 2 weeks because Liz snuffed it. 

But hey, what's the economy compared to one dead old woman? 

the real chronological point of failure by the BoE was in early 2021
 

Wow, interesting - you would think Truss and Kwarteng might have noticed this and not gone for a “fuel on the flames” approach

The government are responsible for fiscal policy and not monetary policy

If what you're saying is that the government should be responsible for both - YES

?? Not sure you’ve understood me. If the BoE’s monetary policy was flawed and inflationary as you say, then why did the government choose fiscal loosening? They might not be “responsible for” both, but they should certainly have their eyes open to both. It’s just dereliction of duty to blunder about like they have. You’re really bending over backwards to make it seem like they bear no responsibility here, but it’s just not working. Sad!

That's just not true. I've said that the government has some responsibility here (fiscal policy). 

The point is that overwhelmingly the blame is on the government, as if nobody else is to blame. This is completely incorrect.  In fact the BoE is also highly culpable. Very much so. 

Btw fiscal loosening would be higher spending (for which you'd need higher taxes) but that's by the by.

Pretty much all developed countries have created a separation between government and the central banks (Federal Reserve, ECB, etc.) that are responsible for monetary policy. The conclusion of over 40 odd years of observing different approaches in different countries was that having central banks be responsible for keep monetary policy centred around trying to maintain a low inflation rate (2% or so) was the best long term approach for the economy. I think that conclusion is sound.

It's possible to agree that the BoE (or more specifically the MPC of the BoE) failed badly in being behind the curve on interest rate increases to curb inflation and doing a Nero all during 2021, while also agreeing that Truss / Kwarteng's "fiscal event" of last week was a complete disaster in economic terms for the UK (never mind the effects of ballooning budget deficits on exchequer finances and the radical inequality of the tax changes or missed opportunity to fix tax issues that are deferring people working more). 

Whatever, you know what I mean. The BoE aren’t culpable for what the government did 18 months later, which was the proximate cause of everything fooking up. They couldn’t have been expected to guess some fooking morons would get into power

The BoE probably should have raised interest rates sooner, along with a lot of other central banks. But not all countries that delayed interest rate tightening are experiencing what we are. The difference is we’ve got some absolute dickheads in power.

@Chimp  On this I generally agree with you. However, the BoE was not just as bad as other central banks in failing to raise rates (or even ending quantitative easing) sooner. Its actions lagged the other central banks by months and one wonders how long it would have taken to act at all if it had not been for the Fed and ECB acting.

Andrew Bailey was asleep at the wheel. Not for the first time.

Well look yes again it's not all the BoE's fault and it's not all the government's - the truth is somewhere in the middle. 

Again I am concerned so flak is heading in the BoE's direction (certainly by comparison with that which is going to the govt). 

Hand in hand with setting the interest rates is money printing. You can't just look at a flat line with rates and think oh well the BoE were just slow to move. What actually happened during this critical 2021 period is that whilst rates were flat the BoE increased MASSIVELY the money printing. That was one big mistake.  Another big mistake was the BoE not doing what is the subject of this thread and mostly because of the new money printing emergency measures that have happened more recently. 

It's almost like actors in the market deliberately are pushing for cheap money greased with QE to continue on and on       hmmmmm

😂 at “somewhere in the middle”

sure, as long as the middle counts as massively wide, right up to the edges and that “somewhere” is firmly on govt’s side of the middle, nice and close to their edge 

How an exchange rate alters the balance of payment depends on what you are exporting and importing. Our exports are relatively price insensitive.

I see the reverse ferret from the original post continued. The 2020-1 QE was to soak up debt the govt needed to issue to fund COVID spending. The world was prepared to live with GFC QE as it was effectively a bank resolution tool to allow printed money to sit on their balance sheets. 

COVID QE was effectively helicopter money. Monetarily disingenuous, but necessary to maintain financial credibility versus failed bond auctions causing a financial crisis during a global health crisis. 

"lolz" calls for the bank to be nationalised, putting it into the hands of the people that insisted on the borrowing in the first place that required the QE to prop up the sales i.e. the govt, the latest iteration of which chose to ignore the fact that deficit funding is a delicate balance and announce massive unfunded spending. 

Perhaps lolz is Liz Truss.