BOE Interest Rate increased to 3%

t1redmonkey

Summary here: https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2022/november-2022

Full MPC report here: https://www.bankofengland.co.uk/monetary-policy-report/2022/november-2022

7 voted for 0.75%, 1 for 0.5%, and 1 for 0.25%(!)

ForumUser7

Thanks for this @t1redmonkey
I had read that economists were predicting a rise from anywhere between 0.5% and 1%, but likely 0.75%. It is interesting that no one voted 1%.

t1redmonkey

ForumUser7 said:

Thanks for this @t1redmonkey
I had read that economists were predicting a rise from anywhere between 0.5% and 1%, but likely 0.75%. It is interesting that no one voted 1%.

Yes I think this is an interesting takeaway from the summary:

The majority of the Committee judges that, should the economy evolve broadly in line with the latest Monetary Policy Report projections, further increases in Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets.

Also watching the BOE conference and Andrew Bailey has said that they are only trying to get inflation to 2%, not 0%.  So basically they are being cautious with future rate rises and trying to not overshoot the mark (i.e. damage the economy more than is necessary by rising rates too far).

eskbanker

t1redmonkey said:
Also watching the BOE conference and Andrew Bailey has said that they are only trying to get inflation to 2%, not 0%. 

Surely their target has been 2% for ages, why would they change that to 0%?

t1redmonkey

eskbanker said:

t1redmonkey said:
Also watching the BOE conference and Andrew Bailey has said that they are only trying to get inflation to 2%, not 0%. 

Surely their target has been 2% for ages, why would they change that to 0%?

They obviously wouldn't change it to 0%, it's just the way he answered the question and the fact he even said that that I think is interesting.  It's signalling they're being cautious and trying to not overshoot the mark (to me that was basically a dig at the US Fed who may well do that with the way they're going!).

Millyonare

The 0.75% raise today was accompanied by the obligatory doom-loop forecasts of recession and economic misery and talking down the future UK economy. The pound is tanking again. The Bank of England (BoE) has become the Bank against England (BaE).

Descrabled

In September they badly misjudged the market. Everyone else knew they had pitched the rise too low. Bailey tried to excuse their mistake but was very unconvincing.

Now that the Fed and ECB had both increased by 75 points so the BOE had no option of an increase below 0.75%. Indeed they should perhaps have gone for 1% rise, thus strengthening sterling and helped reduce inflation on imported food and fuel.

My take is that the BOE will need to push the rate much higher in 2023 because they have been both too timid and too slow.

hallmark

Andrew Bailey and the MPC interpret literally any and all data as something that requires a doveish response.   It's that staggering incompetence that led them to declare inflation was transitory. It's a sobering thought that to this very day at least one member of the MPC actually thinks a 0.25% rise today would have been appropriate.

They couldn't care less about inflation and the damage it causes.   If down the line they prove to have disastrously misjudged yet again, they'll just shrug their shoulders and take their enormous salaries.

biscan25

Interesting views on here. My take is that the BoE remit is far too tightly defined, that being solely to control inflation.

So from the report:

• This flavour of inflation is self defeating
• Raising base rate will damage employment
• Raising base rate will crush growth

But hell, lets raise base rate substantially anyway. I'm surprised that there was not more dissent. Economists are split on whether this is the best approach, or a combination of monetary and fiscal stimulus is the best way. The trouble is, fiscal matters are considered by the treasury/government, and monetary by BoE, so no collaborative outcome can be achieved.

New government needed, independence of BoE needs to be revoked.

Millyonare

The BaE is "predicting" the longest recession for a century.

The Tories are crushing consumers with needless taxes.

We are talking and taxing our country down into the gutter.

hallmark

biscan25 said:

New government needed, independence of BoE needs to be revoked.

Totally agree to revoke the current MPC setup.  But there's no material difference between either party anymore when it comes to the economy.  High taxes, massive overspending, and endlessly expanding the state. Sunak is basically Gordon Brown.