"Lame Duck" MPC stands pat and waits for the new Governor

The calm before Carney's storm?

Last week saw the Bank of England’s Monetary Policy Committee, (MPC), leave base rates unchanged at 0.5 per cent and its Quantitative Easing, (QE), programme left unchanged at £375bn.

This was hardly surprising, given the recent stabilization in UK economic data; better industrial and manufacturing production figures, improved business confidence surveys, higher house prices and new car sales, and no "triple-dip" recession. Add to this the imminent arrival of new Governor Mark Carney - his first meeting will be on 4th July - and there was little prospect of any other outcome.

However, this may well be the calm before the storm as Carney has a reputation for innovation and is truly "new blood" - unusual in that he didn’t rise through the ranks of the Bank.  As head of the Bank of Canada, Mr. Carney became the first major central bank chief to adopt "timeline guidance" when, in 2009, he promised to keep Canada’s benchmark interest rate at 0.25 per cent for a year unless inflation became a problem. The US Federal Reserve subsequently copied this tactic and there is every chance that he will introduce such guidance into the Old Lady’s pronouncements.

I’d expect this change to be announced in August, or September at the latest, and I’d say the chances for further easing measures sit in the balance; depending on economic data developments over the next few weeks.

The Chancellor recently changed the Bank’s mandate so that it can now give more weight to promotion of growth and employment, rather than inflation control, and one would expect Mr Carney to pursue the goal enthusiastically, as presumably he discussed the move with Mr Osborne before accepting his appointment.

If I had to make a call, however, I’d say we will see extension of and improvements to the Funding for Lending Scheme, (FLS), but no further rate cuts or increased QE, as I feel we have finally turned the corner-but it’s certainly a long sweeping bend, rather than a hairpin. Cheap money is finally doing its bit, the Eurozone crisis is contained, and the US recovery is looking increasingly robust. Last Friday’s employment report was very encouraging and US jobless claims for the week ending May 4th continued the good news, coming out at 323,000, the lowest reading since 18th Jan. 2008.

In a further testament to the growing strength of the American recovery, the daily Rasmussen Consumer Index, which measures consumer confidence on a daily basis, rose to 106.2 on May 5th, the highest level since 2007.  The US economic locomotive is finally gathering speed.    

Bank of England. Photograph: Getty Images

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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Labour tensions boil over at fractious MPs' meeting

Corbyn supporters and critics clash over fiscal charter U-turn and new group Momentum. 

"A total fucking shambles". That was the verdict of the usually emollient Ben Bradshaw as he left tonight's Parliamentary Labour Party meeting. His words were echoed by MPs from all wings of the party. "I've never seen anything like it," one shadow minister told me. In commitee room 14 of the House of Commons, tensions within the party - over the U-turn on George Osborne's fiscal charter and new Corbynite group Momentum - erupted. 

After a short speech by Jeremy Corbyn, shadow chancellor John McDonnell sought to explain his decision to oppose Osborne's fiscal charter (having supported it just two weeks ago). He cited the change in global economic conditions and the refusal to allow Labour to table an amendment. McDonnell also vowed to assist colleagues in Scotland in challenging the SNP anti-austerity claims. But MPs were left unimpressed. "I don't think I've ever heard a weaker round of applause at the PLP than the one John McDonnell just got," one told me. MPs believe that McDonnell's U-turn was due to his failure to realise that the fiscal charter mandated an absolute budget surplus (leaving no room to borrow to invest), rather than merely a current budget surplus. "A huge joke" was how a furious John Mann described it. He and others were outraged by the lack of consultation over the move. "At 1:45pm he [McDonnell] said he was considering our position and would consult with the PLP and the shadow cabinet," one MP told me. "Then he announces it before 6pm PLP and tomorow's shadow cabinet." 

When former shadow cabinet minister Mary Creagh asked Corbyn about the new group Momentum, which some fear could be used as a vehicle to deselect critical MPs (receiving what was described as a weak response), Richard Burgon, one of the body's directors, offered a lengthy defence and was, one MP said, "just humiliated". He added: "It looked at one point like they weren't even going to let him finish. As the fractious exchanges were overheard by journalists outside, Emily Thornberry appealed to colleagues to stop texting hacks and keep their voices down (within earshot of all). 

After a calmer conference than most expected, tonight's meeting was evidence of how great the tensions within Labour remain. Veteran MPs described it as the worst PLP gathering for 30 years. The fear for all MPs is that they have the potential to get even worse. 

George Eaton is political editor of the New Statesman.