Today has brought something I have long warned about into focus. This is the so-called improvement made by Bank of England Governor Mark Carney where it votes on a Wednesday evening but does not announce the results until midday on a Thursday. With it being a leaky vessel there was an enhanced risk of an early wire for some.
The City watchdog is to investigate a jump in the pound which took place shortly before the Bank of England’s interest rate announcement on Thursday.
The rise has raised questions over whether the decision to hold the Bank’s base rate at 0.75% had been leaked.
The Financial Conduct Authority (FCA) said: “We are aware of the incident and are looking into it.”
In December, the Bank referred to the FCA a leak of an audio feed of sensitive information to traders.
The value of sterling increased about 15 seconds before midday on Thursday, when the Bank’s Monetary Policy Committee (MPC) made its announcement.
It rose from $1.3023 to $1.3089 against the dollar, and saw a similar increase against the euro.
( BBC )
Actually the Pound had been rallying from much earlier in the morning but perhaps the FCA was not up then. As to the enquiry we know from the TV series Yes Minister how they work.
That’s what leak enquiries are for.
They don’t actually conduct them.
In fact it gets better.
Members may be appointed, but they’ll never meet, and certainly never report.
How many leak enquiries can you recall that named the culprit? – In round figures.
– If you want it in round figures none.
For those of you who have never watched this series it described the UK system of government with both uncanny accuracy and humour. This week alone we saw the Chancellor call for expenditure cuts of 5% exactly as predicted. They will be promised and claimed but somehow wont actually happen if the series continues to be so prescient.
This was a classic Unreliable Boyfriend style performance proving that the Governor has not lost his touch. After hinting and not delivering an interest-rate cut he then in yet another innovation the Monetary Policy Report ( just like in Canada ) cut the expected economic growth rate.
Taken together, potential supply growth is projected to remain subdued, and weaker than expected a year ago.
The MPC judges that potential supply growth will remain subdued over the forecast period, at around 1% on average.
It initially falls a little from its current rate of around 1%, before rising to around 1½% in 2023 Q1.
The problem here was exposed by a good question from the economics editor of the Financial Times Chris Giles who asked why this had fallen so much in Governor Carney’s period of office? You always have an indicator of a hot potato when the question is quickly passed to a Deputy Governor. As ever the absent-minded professor Ben Broadbent waffled inconsequentially as he waited for the audience to lose the will to live. But there are clear underling issues here. The recent one is the fall in the speed limit form 1.5% to 1% as implied here but as Chris highlighted it had already nearly halved. What Chris did not highlight but I will is the impact on this of the woeful “output gap” style thinking which I will illustrate by reminding you that the Governor originally highlighted an unemployment rate of 7% and now in the MPR we are told this.
The MPC judges that the long-term equilibrium unemployment rate has remained at around 4¼%
That is a Boeing 737 Max style error.
It is hard not to recall Governor Carney tell us “this is not a debt-fuelled recovery” as you read the numbers below.
The extra amount borrowed by consumers in order to buy goods and services increased to £1.2 billion in December, in line with the £1.1 billion average seen since July 2018. Within this, net borrowing on credit cards recovered from a very weak November to £0.4 billion. Net borrowing for other loans and advances remained the same as in November, at £0.8 billion.
As you can see we are little the wiser as to why credit card spending fell in the way in did in the previous release ( November data). It may just be one of those things because the surrounding months were relatively strong a bit like we often see with the UK pharmaceutical sector which does not run in even months.
A consequence of this is below.
The annual growth rate of consumer credit rose to 6.1% in December, having ticked down to 5.9% in November. The growth rate for consumer credit has been close to this level since May 2019. Prior to this it had fallen steadily from an average of 10.3% in 2017.
So after rocketing it is merely rising very strongly! From. of course, a higher base. Can anybody think of anything else in the UK economy rising at this sort of rate? It is six times the rate at which the Bank of England now thinks the economy can grow at and around double wages growth.
Actually household consumption full stop picked up.
Net mortgage borrowing by households was £4.6 billion in December, above the £4.2 billion average seen over the past six months. Despite these stronger flows, the annual growth rate for mortgage borrowing remained at 3.4%. Mortgage approvals for house purchase (an indicator for future lending) also picked up in December, to 67,200, above the 65,900 average of the past six months. Approvals for remortgage rose slightly on the month to 49,700.
For newer readers this continues a trend started by the Funding for Lending Scheme which began in the summer of 2012. It took a year to turn net mortgage lending positive but over time this example of credit easing has had the effect you see above. Of course in true Yes Minister style it was badged as a policy to boost small business lending, how is that going?
Within this, the growth rate of borrowing from large businesses and SMEs fell to 4.4% and 0.8% respectively.
Actually and you have to dig into the detail to find this for some reason, smaller business borrowed an extra 0 in December which followed an extra 0 in November.
The last 24 hours have been an example of the UK deep-state in action. For example the ground was set for the new Bank of England Governor Andrew Bailey to reward the government with an interest-rate cut in return for his appointment just like in Yes Prime Minister. Meanwhile as head of the FCA he can make sure that the leak enquiry into the current Governor does not impact in his own term in a sort of insider regulation response to possible insider trading.
Meanwhile the new Governor has already lived down to his reputation for competence.
The Financial Conduct Authority (FCA) said most High Street banks had set “very similar prices”, after it demanded changes to the system.
Several big brands including Santander, Lloyds Banking Group and HSBC are set to bring in a 39.9% rate this year.
The FCA has sent a letter to banks, asking them to explain what influenced their decision.
The City regulator has also asked how the banks will deal with any customers who could be worse off following the changes.
Yep the reforms of the FCA have more than doubled overdraft rates for some. Today’s Bank of England release has picked up a bit of this as its quoted rate is now 20.69% adding to something that I have reported throughout the life of this blog. Official interest-rates may fall but some real world ones have risen.
So as we consider Bank of England Governors let me leave you with one of the finest from the Who.
I’ll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around
Pick up my guitar and play
Just like yesterday
Then I’ll get on my knees and pray
We don’t get fooled againNo, no!
We don’t get fooled again