B of E Governor

[Dod101]

He at least gives the appearance of not being up to the job and it is said that under him, the B of E carried on with QE for far too long and then has raised interest rates much too slowly. Terrified of recession. We are all castigating Germany at the moment but would a hopefully short sharp shock not have been better than the perpetual nothing happening that we have now got?

And yet Bailey is in place for 8 years with another 5(?) to go. This constant drip we are getting is depressing and since this is an investment site, I can say that I am beginning to feel the effect via the stockmarket prices. Otherwise I am not personally affected that much because my income/expenses are such that I am just doing my customary thing which is cut down on 'frivolous' or at least unnecessary, expenditure.

And in my part of the world shops and restaurants are still very busy.

Dod

[tjh290633]

I am reminded of the old story about the ship, where the Captain called the crew to the foredeck and asked "Who called the cook a bastard?". A voice from the back called out "Who called the bastard a cook?".

Bailey is useless.

TJH

[Laughton]

Bailey is useless.

Carry on carrying on - he was useless in his previous position too.

[Mike4]

I am reminded of the old story about the ship, where the Captain called the crew to the foredeck and asked "Who called the cook a bastard?". A voice from the back called out "Who called the bastard a cook?".

Bailey is useless.

TJH

To me, he comes across in the media as smug and complacent. And his record so far seems to support this impression.

My fear now is the effect of the first few base rate rises so far will begin to have the desired effect soon, and the most recent four or five will amplify the effect far more than necessary.

[GoSeigen]

I am far from a supporter of Bailey but I find this accusation incomprehensible:

it is said that under him, the B of E carried on with QE for far too long

Who exactly said this?

Bailey became governor of the BoE in March 2020 and QE ended in Nov 2020. Now I know people are meant to hit the ground running and all that but what does it mean that under him QE went on "far too long"? Six months??? In which of those six months should QE have ended to make an appreciable difference to 1. his reputation and 2. the economy? [EDIT: do people realise monetary policy is set by a committee, not an individual?]

Terrified of recession.

When in March 2020 practically every government in the world locked down the economy he should have whistled away and told everyone there was no danger whatsoever of a recession??? Oil futures were minus $40 at May 2020 expiration.

would a hopefully short sharp shock not have been better than the perpetual nothing happening that we have now got?

What does this "perpetual nothing" refer to? Surely not the MPC, which has been engaged in both raising interest rates AND quantitative tightening (the opposite of QE)?

I agree that the economy for now is in somewhat rude health, else how could rates rise so fast with little adverse effect, but can we please see what Dod101's monetary policy would have been from March 2020 to date?

Thanks.

GS

[spasmodicus]

I am reminded of the old story about the ship, where the Captain called the crew to the foredeck and asked "Who called the cook a bastard?". A voice from the back called out "Who called the bastard a cook?".

Bailey is useless.

TJH

To me, he comes across in the media as smug and complacent. And his record so far seems to support this impression.

My fear now is the effect of the first few base rate rises so far will begin to have the desired effect soon, and the most recent four or five will amplify the effect far more than necessary.

Interest rates are a very blunt instrument and whilst I agree that Bailey looks like an almost archetypal fat cat, he is caught between a rock and a hard place. Maybe he wanted to rack rates up by 2.5 percent at the outset, intead of the current frog-boiling sequence of rises, but was leaned on by HMG. I can just imagine someone like Boris saying, off the record, "you need to watch out for that knighthood, you know". His predecessor is not a very edifying sight either, jumping up and down saying "Brexit - I told you so".

But there's also an element of collective responsibility here. There's plenty of historical precedent for interest rates to go above 5 percent in the UK and anyone who ever bid more than the asking price for a house has to bear some responsibillty for the current situation.
Caveat emptor,
S

[Dod101]

I am far from a supporter of Bailey but I find this accusation incomprehensible:

it is said that under him, the B of E carried on with QE for far too long

Who exactly said this?

Bailey became governor of the BoE in March 2020 and QE ended in Nov 2020. Now I know people are meant to hit the ground running and all that but what does it mean that under him QE went on "far too long"? Six months??? In which of those six months should QE have ended to make an appreciable difference to 1. his reputation and 2. the economy? [EDIT: do people realise monetary policy is set by a committee, not an individual?]

Terrified of recession.

When in March 2020 practically every government in the world locked down the economy he should have whistled away and told everyone there was no danger whatsoever of a recession??? Oil futures were minus $40 at May 2020 expiration.

would a hopefully short sharp shock not have been better than the perpetual nothing happening that we have now got?

What does this "perpetual nothing" refer to? Surely not the MPC, which has been engaged in both raising interest rates AND quantitative tightening (the opposite of QE)?

I agree that the economy for now is in somewhat rude health, else how could rates rise so fast with little adverse effect, but can we please see what Dod101's monetary policy would have been from March 2020 to date?

Thanks.

GS

Always good to have an aggressive response from GS.

Actually the B of E's own site tells us that QE ended 'at the end of 2021' although my reference for my comment was I think in the Sunday Times last week when someone commented that the QE at the time of the experiment with Trussonomics went on far too long. (It was not called QE then but it amounted to the same thing)

The 'nothing happening' is re the highly corrosive inflation that we currently have. Is GS not aware that that is the concern of the day at the moment and why interest rates may well be increased again this later this morning?

I am no economist so I have no proposals. I just read what I can and observe what is happening in the real world. Nothing that the B of E, led by that splendid fellow, Bailey the Governor, has done has made much difference to anything and certainly not to inflation. His forecasting (always a difficult pursuit I will grant you) has been abysmmal.

Dod

[Dod101]

To me, he comes across in the media as smug and complacent. And his record so far seems to support this impression.

My fear now is the effect of the first few base rate rises so far will begin to have the desired effect soon, and the most recent four or five will amplify the effect far more than necessary.

Interest rates are a very blunt instrument and whilst I agree that Bailey looks like an almost archetypal fat cat, he is caught between a rock and a hard place. Maybe he wanted to rack rates up by 2.5 percent at the outset, intead of the current frog-boiling sequence of rises, but was leaned on by HMG. I can just imagine someone like Boris saying, off the record, "you need to watch out for that knighthood, you know". His predecessor is not a very edifying sight either, jumping up and down saying "Brexit - I told you so".

But there's also an element of collective responsibility here. There's plenty of historical precedent for interest rates to go above 5 percent in the UK and anyone who ever bid more than the asking price for a house has to bear some responsibillty for the current situation.
Caveat emptor,
S

Anyone who has bid over the asking price for a house (very many potential buyers I would imagine) was simply reacting to the market which itself is a reflection of the competition and the availability of cheap credit. It seems pretty obvious that the main driver for inflation has been the big increase in energy costs, but also all that money which was poured into the economy by QE.

No one however wants to be the one to tell people and take the flack. I have not been a borrower in any sense for at least the last 25 years so I welcome what is happening.

Dod

[77ss]

......

I am no economist so I have no proposals. I just read what I can and observe what is happening in the real world. Nothing that the B of E, led by that splendid fellow, Bailey the Governor, has done has made much difference to anything and certainly not to inflation. His forecasting (always a difficult pursuit I will grant you) has been abysmmal.

Dod

I have absolutely no idea whether or not Bailey is competent or otherwise, but I it fair to mention the elephants in the room.

His period of tenure has coincided with:

The after effects of Brexit.
Covid.
The war in the Ukraine.
A chaotic government.

This is not the place to debate any of these factors, but surely they constitute very strong headwinds. None of them of his making.

One should also bear in mind that he is not a one-man band.

[XFool]

I have absolutely no idea whether or not Bailey is competent or otherwise, but I it fair to mention the elephants in the room.

His period of tenure has coincided with:

The after effects of Brexit.
Covid.
The war in the Ukraine.
A chaotic government.

This is not the place to debate any of these factors, but surely they constitute very strong headwinds. None of them of his making.

One should also bear in mind that he is not a one-man band.

I agree.

Nowadays, for some reason, the Governor of The BoE seems to be used as a public scapegoat, whoever he is. Remember how 'popular' Carney was?

[88V8]

...... I am no economist so I have no proposals. I just read what I can and observe what is happening in the real world. Nothing that the B of E, led by that splendid fellow, Bailey the Governor, has done has made much difference to anything and certainly not to inflation. His forecasting (always a difficult pursuit I will grant you) has been abysmal.

I have absolutely no idea whether or not Bailey is competent or otherwise, but I it fair to mention the elephants in the room.....

True, but at the FCA he was Mr Donothing and I always suspected he got the BoE job with a brief to continue.

V8

[Dod101]

I have absolutely no idea whether or not Bailey is competent or otherwise, but I it fair to mention the elephants in the room.

His period of tenure has coincided with:

The after effects of Brexit.
Covid.
The war in the Ukraine.
A chaotic government.

This is not the place to debate any of these factors, but surely they constitute very strong headwinds. None of them of his making.

One should also bear in mind that he is not a one-man band.

I agree.

Nowadays, for some reason, the Governor of The BoE seems to be used as a public scapegoat, whoever he is. Remember how 'popular' Carney was?

He may be but he took on the job knowing that one of his important briefs/ the B of E's is to maintain inflation at no more than 2%. In that he has demonstrably failed to date.

Dod

[1nvest]

I agree.

Nowadays, for some reason, the Governor of The BoE seems to be used as a public scapegoat, whoever he is. Remember how 'popular' Carney was?

He may be but he took on the job knowing that one of his important briefs/ the B of E's is to maintain inflation at no more than 2%. In that he has demonstrably failed to date.

Dod

BoE is independent in name only, works 'very closely' with the treasury, that is directed by the Chancellor/government. A scapegoat for a lousy Chancellor (now PM). When the Chancellor wastes/loses trillions !!!

[1nvest]

7-2 majority to raise rate by 0.5% to 5%

Market adjusts to price in a terminal (peak) rate of a little under 6%

[Dod101]

He may be but he took on the job knowing that one of his important briefs/ the B of E's is to maintain inflation at no more than 2%. In that he has demonstrably failed to date.

Dod

BoE is independent in name only, works 'very closely' with the treasury, that is directed by the Chancellor/government. A scapegoat for a lousy Chancellor (now PM). When the Chancellor wastes/loses trillions !!!

Well who knows? And whether Sunak was a lousy Chancellor or not I do not know.

Anyway. Base Rate now 5% I see. Se what that does.

Dod

[Nemo]

The Plank of England:

Much of this misery could have been avoided if Bailey, nicknamed “The Plank of England” by City critics, had heeded persistent warnings from economists, including his most senior bank adviser.

https://www.thesun.co.uk/news/22769458/ ... -kavanagh/

[1nvest]

RPI (that I personally prefer to track/use) was near 14% across 2022, and looks likely to only have declined to 9% across 2023. Could achieve being 5% assuming 0% inflation every month from now to year end


(monthly inflation change (left hand scale) and accumulated (right hand scale)

To get inflation down requires prices falling.

As per Dod, our lifestyle remains unchanged, and local (Southern London/Surrey) general activities/spending largely seem unchanged. Many I imagine are just carrying on as normal, bearing the higher costs out of savings, or via charging more for their labour/works and where demand remains high.

Embedded inflation, perhaps end of 2024 before its back down towards target 2% levels.

https://www.statista.com/statistics/374 ... recast-uk/ also agrees, suggesting 2023 8.9%, 2024 1.6%

Can't see a case of stagflation, as that requires high inflation, low/declining growth and rising/high unemployment and I suspect unemployment wont rise (existing staff shortages demand persisting). So just slow growth, high inflation. Which was pretty much to be expected under Sunak's policies of driving out capital (taxation) and wasteful spending/debt expansion.

All the BoE might do given they're not really independent is to continue progressively increasing rates across 2023 and then start progressively lowering them again across 2024

[Nemo]

He's not doing himself any favours is he:

BoE chief Andrew Bailey (who earns £575k) blames Brits demanding 'unsustainable' pay rises after hiking interest rates to 5% in desperate bid to curb inflation - as Rishi Sunak backs move despite Tory fury

https://www.dailymail.co.uk/news/articl ... -hike.html

[Laughton]

And what does he expect?

Prices rising, partly because wages are rising, so those in work demand higher wages - and so on and so on. I think it's known as a wages/prices spiral.

Not just homeowners getting hammered with steeply rising mortgage rates, plenty of, especially, smaller businesses also suffering (they have increasing costs but no real pricing power).

But maybe he thinks it's a price worth paying - drive businesses out of business thereby driving up unemployment thereby reducing workers power to demand higher wages. But many of those soon to be unemployed might discover that they can survive just as well if not better on benefits.

He'll be able to retire soon on a gold plated, index linked pension, so what does he care.

[Laughton]

It's either me of him that's living in a parralel universe:-

"It comes after Mr Bailey, in a letter to the Chancellor following the rate rise announcement, said some shops might be “rebuilding” their profit margin by passing inflation costs to consumers via increased prices."

What does he expect?