Bank of England won't let inflation get out of control, Ramsden says

[rebbonk]

Let's be honest, you couldn't trust these muppets to run a bath!

Bank of England Deputy Governor Dave Ramsden said interest rates were very likely to have to go up further to stop a repeat of the persistently high inflation that beset Britain in previous decades.

"We will have to respond to whatever happens but we want people to understand that we're not going to let high inflation to become sustained and get out of control like it did in the '70s and '80s," Ramsden said in an interview with BusinessLive.

Rates are "very likely to have to go up further", he said in an interview.

British government bond futures briefly fell to a day's low on the comments from Ramsden, who has in the past been on the hawkish end of the BoE's Monetary Policy Committee.

The BoE has raised rates five times since December as it tries to stop the surge in inflation from becoming embedded in Britain's economy, and it is expected to increase them again at its August monetary policy meeting.

Investors on Thursday were pricing a roughly 83% chance of the BoE announcing a rare half-percentage point hike on Aug. 4.

It said in June that it was ready to act "forcefully" if needed.

Ramsden repeated the BoE's latest forecast that annual inflation - which reached 9.1% in May - will peak later this year at around 11%, or the highest rate since the early 1980s.

"That does mean times are going to continue to be really tough," he said.

Source: https://www.reuters.com/markets/rates-bonds/bank-england-wont-let-inflation-get-out-control-ramsden-says-2022-07-14/

[dutchman]

Nine in 10 Bank of England staff handed bonuses as inflation soars



Nine in 10 employees at the Bank of England were handed bonuses last year even as inflation soared beyond its 2pc target.

A total of 4,263 workers, accounting for about 90pc of its workforce, received a bonus last year, disclosures show. The highest payouts were between £15,000 and £20,000, with 34 members of staff getting rewards in this range.

More than 300 employees received a bonus between £10,000 and £15,000 and 1,733 were awarded between £5,000 and £10,000. In total, the central bank spent £23m on variable compensation last year.

The disclosures are likely to heighten scrutiny of the central bank and leave it open to accusations of rewarding failure. Inflation has soared to a 40-year high over the last year, crossing the Bank’s 2pc target in May 2021 and hitting 9.4pc in June.

July’s data, due on Wednesday, is expected to show price rises accelerated to 9.8pc and Threadneedle Street expects inflation to peak above 13pc later this year.

Andrew Bailey, the Governor of the Bank of England, was heavily criticised earlier this year after telling workers not to ask for high pay rises because inflation had to be kept under control. Mr Bailey, who is not eligible for a bonus, earned £597,592 last year.

Liz Truss, foreign secretary and frontrunner in the Tory leadership contest, has said she wants to review the mandate of the Bank of England in light of soaring inflation.

The Governor has defended the central bank’s independence but has told the Chancellor, Nadhim Zahawi, that he would be “open to a review”.

Bank of England officials say the vast majority of its staff do not work on monetary policy. The Bank of England declined to comment on its bonus policy.

The total bonus pot was the highest level for at least two years, the Observer first reported, though the number of employees has also increased.

[rebbonk]

I'm afraid that the BOE, like many institutions, is simply not fit for its purpose. As regards bonuses, it is a travesty. Bonuses are for those that go over and beyond what is expected of them, not for simply doing (or not in this case) what they are expected to do. It is high time that the being rewarded for failure culture of this country was stopped.

[dutchman]

Bank of England expected to double interest rates as inflation soars

Interest rates are set to double in the next six months, with traders in financial markets betting the Bank of England will have to step up its efforts to stamp out price rises as inflation breaks into double digits.

Consumer prices rose by 10.1pc in July compared to a year earlier, according to the Office for National Statistics (ONS), outpacing the Bank’s forecasts of a 9.9pc jump.

Officials, led by Governor Andrew Bailey, have already raised rates from 0.1pc in December to 1.75pc earlier this month in an effort to stamp out rising prices.

Financial markets expect the Bank to now take the base rate to 3.5pc, or even 3.75pc, in early 2023. Another 0.5 percentage point increase is expected next month.

“We expect swift action from the Bank of England with the base rate potentially doubling by this time next year,” said Debapratim De, an economist at Deloitte.

The pound fell by one-third of 1pc against both the dollar and the euro despite expectations of higher rates. Investors fear that aggressive rises will worsen a looming recession.

Mr De said: “As the Bank moves aggressively to crush double-digit inflation, we are forecasting a 1.6pc contraction in activity between this autumn and the next. This is a much smaller contraction than the pandemic but, with a sharp squeeze on consumer spending power and likely rise in unemployment, will feel significantly disruptive.”

Economists at Bank of America expect inflation to peak at 14pc in January when the energy price cap rises once again.

[dutchman]

"Early 2023" hardly constitutes "swift action from the Bank of England."

[dutchman]

Bank of England delays next week's interest rate decision

The Bank of England's Monetary Policy Committee has delayed its decision on whether it will raise the base rate for one week, as the country begins its period of national mourning following the death of Her Majesty Queen Elizabeth II.

A period of national mourning for the Queen has now commenced and will continue until the end of the day of her state funeral, thought to be in 10 or 11 days' time.

The committee, which was meant to meet on Thursday 15 September, will now convene on Thursday 22 September with a decision announced at noon.

Delaying the decision will mean borrowers and savers will need to wait longer to find out how high interest rates will rise.

How convenient!

[rebbonk]

This is an unacceptable excuse, just as we've seen nothing but unacceptable excuses over the past few years from the Tories. It seems that making excuses is becoming more contagious than covid!

[dutchman]

Interest rate rises to 2.25%

UK interest rates have increased to 2.25% - the seventh time in a row the Bank of England has raised rates in an attempt to tame rising prices.

The rate has been lifted by half a percentage point from 1.75% and takes borrowing costs to their highest levels since 2008 during the global financial crisis.

Interest rates have been rising since last December as inflation has swelled to its worst level in four decades.

[dutchman]

Too little, too late!

It needed to rise by at least 0.75% just to keep pace with the US Dollar.

[rebbonk]

I tend to agree, Dutchman.

My bet is that their fear of going higher and faster is that it will hit those in debt (mortgages, loans etc.) and cause them to stop spending, which reduces the money in circulation, which in turn screws up their precious growth projections.