THE new Bank of England governor Carney yesterday in his ‘Inflation Report’ gave big business a sample of his ‘forward guidance’.
This amounted to inflation, more inflation and yet more inflation with an assurance to the Banks that since the UK economy is experiencing only a tiny increase in production, only runaway inflation will force the Bank into raising its 0.5% interest rates and halting the extension of its £375bn of quantitative easing.
Meanwhile, elderly savers will continue to be crucified for the benefit of the banks, who will continue to receive billions of quantitative easing for nothing.
Carney spoke about the ‘renewed recovery’: ‘While that is certainly welcome, the legacy of the financial crisis means that the recovery remains weak by historical standards…This is the slowest recovery in output on record.’
He added: ‘What is clear is that, even under conservative assumptions about the scope for a productivity rebound, the elimination of the margin of spare capacity will require a sustained period of robust growth.’
He concluded that: ‘For that reason, the MPC’s judgement is that the path of market interest rates implies a faster withdrawal of monetary stimulus than appears likely given the current economic outlook.’
Carney said that the Bank’s Monetary Policy Committee (MPC) ‘agreed at its meeting last week to adopt “forward guidance”. The MPC intends, at a minimum, to maintain the currently exceptionally accommodative stance of monetary policy until economic slack has been substantially reduced, provided that this does not put at risk either price stability or financial stability.
‘In practice, that means the MPC intends not to raise the Bank Rate above its current level of 0.5% at least until the Labour Force Survey headline measure of unemployment has fallen to a threshold of 7%. While the unemployment rate remains above 7%, the MPC stands ready to undertake further asset purchases if further stimulus is warranted. But until the unemployment threshold is reached the MPC intends not to reduce the stock of asset purchases from the current £375 billion.’
However: ‘The guidance will remain in place only if, in the MPC’s view, CPI inflation 18 to 24 months ahead is more likely than not to be below 2.5%…
He added: ‘The knock-outs would not necessarily trigger an increase in Bank Rate – they would instead be a prompt for the MPC to reconsider the appropriate stance of policy.
‘Similarly, it is important to be clear that Bank Rate will not automatically be increased when the unemployment threshold is reached. Nor is 7% a target for unemployment…So 7% is merely a “way station” at which the MPC will reassess the state of the economy, the progress of the economic recovery, and, in that context, the appropriate stance of monetary policy.’
On the issue of jobs and the ‘recovery’, Governor Carney was deeply cynical.
He said of his report: ‘It shows that, with Bank Rate remaining constant at 0.5% throughout the 3-year forecast period, the MPC’s best collective judgement is that the median unemployment rate at the end of the projection period is 7.3%.’
The state of the economy will require quantitative easing for well over three years.
He said: ‘What is new is that the MPC, given current exceptional circumstances, is today setting out the conditions that will need to be met before we consider increasing Bank Rate or reducing our stock of asset purchases. We are introducing forward guidance as part of a mixed strategy that also includes Bank Rate at a historic low, asset purchases and the Funding for Lending Scheme.’
He finished: ‘There is understandable relief that the UK economy has begun growing again. But there should be little satisfaction.’
Quite, the truth is that outdated capitalism must go and be replaced by socialism and planned production to satisfy people’s needs.
