We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
Debate House Prices
In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non MoneySaving matters are no longer permitted. This includes wider debates about general house prices, the economy and politics. As a result, we have taken the decision to keep this board permanently closed, but it remains viewable for users who may find some useful information in it. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
BOE WATCH: Weak Lending Raises Likelihood Of Further Stimulus
inspector_monkfish
Posts: 9,276 Forumite
12:36 18Sep09 BOE WATCH: Weak Lending Raises Likelihood Of Further Stimulus
LONDON - Bank lending to U.K. households and businesses remains depressed, increasing the likelihood that the bank of England will increase its bond-buying program and cut the rate it pays banks on their reserves.
Economists and policy makers believe the U.K. economy is expanding this quarter, having contracted in each of the previous five quarters. But the BOE fears the recovery could be weakened or derailed if bank lending doesn't pick up soon.
However, early indications for August suggest bank lending has yet to revive. The Council of Mortgage Lenders Friday said gross mortgage lending fell by 13% from July to GBP12.6 billion, while the BOE's own broad measure of bank lending increased by just 0.1% from July, and its annual rate of growth slowed to 7.1% from 8.2%.
In a separate report on trends in lending, the BOE said lending to businesses fell by GBP15.5 billion in July, and continued to decline in August. The July fall was the largest since records began in 1998.
That would appear to suggest that there is no end in sight to the problems in the banking sector that prompted the central bank's Monetary Policy Committee to increase its bond-buying program to GBP175 billion from GBP125 billion in August.
The program - a form of quantitative easing - is intended to boost the broad supply of money to the economy, and ultimately, nominal spending. But directly or indirectly, that boost must be transmitted through the financial system.
In testimony to lawmakers Tuesday, BOE Governor Mervyn King and other members of the MPC said there are some signs that quantitative easing is beginning to boost nominal demand and growth in the money supply.
But they stressed that the continuing lack of bank lending was dragging on economic output. Their comments suggested that while the central bank may be nearing the end of its policy-easing measures, it is keeping open the option of a further extension to quantitative easing should signs of recovery stall.
David Miles, a relatively new member of the MPC and one who voted for an even larger increase in bond purchases in August, underlined the central bank's concerns in a newspaper interview published Friday.
"This is going to be a protracted period of a return to a more normal level of activity," Miles told The Independent.
The MPC also indicated that it is considering a reduction in the BOE's
deposit rate to discourage banks from hoarding reserves. Miles said he was open to such a move.
"You might almost call it fine tuning or a supplement to the operation of QE," he said.
But as weak as the August lending figures are, they don't make another increase in bond buying or a cut in the deposit rate inevitable.
That's because it's far from clear that depressed levels of lending are
solely or mainly the result of a lack of willingness on the part of the banks. According to the BOE's report, weak demand may be as much of a factor.
"Lenders have yet to detect any significant increase in demand for new lending over and above the refinancing of existing facilities," the BOE said.
As in other parts of Europe, bond issuance by U.K. companies surged during the first half of this year. The MPC believes this was partly because of its program of quantitative easing, as investors use the proceeds of their sales of U.K. government bonds to the BOE to buy other assets.
Companies appear to have used some of those funds to repay their bank debt. The good news from the BOE's viewpoint is that they are keeping their facilities with the banks open and ready to use if they become more confident about the recovery.
"Market intelligence suggests that companies have created this headroom so that, should investment opportunities arise in the future, they could respond quickly without having to negotiate new loan facilities," the BOE said.
But there are signs that bond issuance is slowing. In August, net issuance fell to GBP7.4 billion from GBP20.8 billion in July. If that continues, and bank lending stays subdued, the BOE may have to act again.
LONDON - Bank lending to U.K. households and businesses remains depressed, increasing the likelihood that the bank of England will increase its bond-buying program and cut the rate it pays banks on their reserves.
Economists and policy makers believe the U.K. economy is expanding this quarter, having contracted in each of the previous five quarters. But the BOE fears the recovery could be weakened or derailed if bank lending doesn't pick up soon.
However, early indications for August suggest bank lending has yet to revive. The Council of Mortgage Lenders Friday said gross mortgage lending fell by 13% from July to GBP12.6 billion, while the BOE's own broad measure of bank lending increased by just 0.1% from July, and its annual rate of growth slowed to 7.1% from 8.2%.
In a separate report on trends in lending, the BOE said lending to businesses fell by GBP15.5 billion in July, and continued to decline in August. The July fall was the largest since records began in 1998.
That would appear to suggest that there is no end in sight to the problems in the banking sector that prompted the central bank's Monetary Policy Committee to increase its bond-buying program to GBP175 billion from GBP125 billion in August.
The program - a form of quantitative easing - is intended to boost the broad supply of money to the economy, and ultimately, nominal spending. But directly or indirectly, that boost must be transmitted through the financial system.
In testimony to lawmakers Tuesday, BOE Governor Mervyn King and other members of the MPC said there are some signs that quantitative easing is beginning to boost nominal demand and growth in the money supply.
But they stressed that the continuing lack of bank lending was dragging on economic output. Their comments suggested that while the central bank may be nearing the end of its policy-easing measures, it is keeping open the option of a further extension to quantitative easing should signs of recovery stall.
David Miles, a relatively new member of the MPC and one who voted for an even larger increase in bond purchases in August, underlined the central bank's concerns in a newspaper interview published Friday.
"This is going to be a protracted period of a return to a more normal level of activity," Miles told The Independent.
The MPC also indicated that it is considering a reduction in the BOE's
deposit rate to discourage banks from hoarding reserves. Miles said he was open to such a move.
"You might almost call it fine tuning or a supplement to the operation of QE," he said.
But as weak as the August lending figures are, they don't make another increase in bond buying or a cut in the deposit rate inevitable.
That's because it's far from clear that depressed levels of lending are
solely or mainly the result of a lack of willingness on the part of the banks. According to the BOE's report, weak demand may be as much of a factor.
"Lenders have yet to detect any significant increase in demand for new lending over and above the refinancing of existing facilities," the BOE said.
As in other parts of Europe, bond issuance by U.K. companies surged during the first half of this year. The MPC believes this was partly because of its program of quantitative easing, as investors use the proceeds of their sales of U.K. government bonds to the BOE to buy other assets.
Companies appear to have used some of those funds to repay their bank debt. The good news from the BOE's viewpoint is that they are keeping their facilities with the banks open and ready to use if they become more confident about the recovery.
"Market intelligence suggests that companies have created this headroom so that, should investment opportunities arise in the future, they could respond quickly without having to negotiate new loan facilities," the BOE said.
But there are signs that bond issuance is slowing. In August, net issuance fell to GBP7.4 billion from GBP20.8 billion in July. If that continues, and bank lending stays subdued, the BOE may have to act again.
Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
(MSE Andrea says ok!)
(MSE Andrea says ok!)
0
Comments
-
inspector_monkfish wrote: »However, early indications for August suggest bank lending has yet to revive. The Council of Mortgage Lenders Friday said gross mortgage lending fell by 13% from July to GBP12.6 billion, while the BOE's own broad measure of bank lending increased by just 0.1% from July, and its annual rate of growth slowed to 7.1% from 8.2%.
In a separate report on trends in lending, the BOE said lending to businesses fell by GBP15.5 billion in July, and continued to decline in August. The July fall was the largest since records began in 1998.
That would appear to suggest that there is no end in sight to the problems in the banking sector that prompted the central bank's Monetary Policy Committee to increase its bond-buying program to GBP175 billion from GBP125 billion in August.
This is the bit that interests/confuses the living daylights out of me.
The statement also implies that we aren't as close to hot-footing it out of recession as some would have us believe...It's getting harder & harder to keep the government in the manner to which they have become accustomed.0 -
lemonjelly wrote: »The statement also implies that we aren't as close to hot-footing it out of recession as some would have us believe...
I think that is a missconception on here. Out of recession = Boom.
I think the BOE think growth is going to be very marginal and still may need support to be sustained.
(Even if we do come out this 1/4 it growth will be very marginal)0 -
inspector_monkfish wrote: »12:36 18Sep09 BOE WATCH: Weak Lending Raises Likelihood Of Further Stimulus
LONDON - Bank lending to U.K. households and businesses remains depressed, increasing the likelihood that the bank of England will increase its bond-buying program and cut the rate it pays banks on their reserves.
A crazy thought - but could it be that households don't actually want to borrow more money as they don't feel secure enough in their jobs etc?
I'd like to think that I'm in a position to get a loan should I want one, but the fact is, I don't want one. Banks can't make people borrow money.... can they?0 -
I think that is a missconception on here. Out of recession = Boom.
I think the BOE think growth is going to be very marginal and still may need support to be sustained.
(Even if we do come out this 1/4 it growth will be very marginal)
I take your point, but I don't think it is a notion only held on these boards.A crazy thought - but could it be that households don't actually want to borrow more money as they don't feel secure enough in their jobs etc?
I'd like to think that I'm in a position to get a loan should I want one, but the fact is, I don't want one. Banks can't make people borrow money.... can they?
Think the main issue here is that banks aren't lending to business', the issue about lending to individuals is a much less significant issue.It's getting harder & harder to keep the government in the manner to which they have become accustomed.0 -
Why don't they just make them lend? They keep going on that this stimulus is to filter through, but then say that hasn't worked, we need more stimulus. Then they will say "its not working, we need more stimulus".0
-
Graham_Devon wrote: »Why don't they just make them lend? They keep going on that this stimulus is to filter through, but then say that hasn't worked, we need more stimulus. Then they will say "its not working, we need more stimulus".
Freedom of contract Graham.
If I didn't want to do business with you, I don't see how the state could force me, unless it was a statutory function to which you had a legal entitlement.
Otherwise, in business, I am free to do business with whoever I (legally) choose to do so. Same way a customer has the choice to go elsewhere.
I don't see how the state can legislate to force a bank to lend? Moreso given the "crunch" came about as a result of irresponsible lending, & there are various campaigns against returning to those days...It's getting harder & harder to keep the government in the manner to which they have become accustomed.0 -
How about we do it the old fasioned way and save or dont buy?0
-
With the banks deciding to hide their bad assets, and all knowing that the others are going it too, it is hardly surprising that they are not lending.
And the alternative (fiscal policy) is now taboo because it is judged that the national debt is more worrying than mass unemployment. There is a stultification of ideas that makes people think that there is no alternative to more of the same (the Tories are as neoliberal as New Labour).
It seems we are going to turn into Japan after all. Forever blowing bubbles and forever pushing strings.Politics is not the art of the possible. It consists of choosing between the disastrous and the unpalatable. J. K. Galbraith0 -
Why don't they just make them lend?
Good thinking !!!! :eek:'In nature, there are neither rewards nor punishments - there are Consequences.'0 -
Sir_Humphrey wrote: »With the banks deciding to hide their bad assets, and all knowing that the others are going it too, it is hardly surprising that they are not lending.
And the alternative (fiscal policy) is now taboo because it is judged that the national debt is more worrying than mass unemployment. There is a stultification of ideas that makes people think that there is no alternative to more of the same (the Tories are as neoliberal as New Labour).
It seems we are going to turn into Japan after all. Forever blowing bubbles and forever pushing strings.
What would you do from here, please?0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 352.1K Banking & Borrowing
- 253.6K Reduce Debt & Boost Income
- 454.3K Spending & Discounts
- 245.2K Work, Benefits & Business
- 600.9K Mortgages, Homes & Bills
- 177.5K Life & Family
- 259K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards