Right message, wrong time

It's precisely the wrong moment for central bankers to say they’re unimpressed.

This week saw the publication of the minutes of the Bank of England’s Monetary Policy Committee’s, (MPC), last meeting, on  3/4th July. They revealed that the decision to refrain from more Quantitative Easing, (QE), was unanimous. This makes it all the more likely that the publication of next month’s Bank of England quarterly Inflation Report will be accompanied by the introduction of so-called "forward guidance" on the future path of interest rates.

There are two variants of this seemingly arcane piece of central bank armament; "threshold dependent", the variety favoured by the Fed, where increases in rates are tied to metrics of economic performance, or the "time dependent" alternative tentatively embraced by the ECB, which promises to keep rates low, "for an extended period", say. My guess would be that the MPC will also go for the latter, as it is more likely to gain unanimous support on the committee.

Personally, for the UK, I find these policies at best a flawed concept, at worst quite probably counter-productive, and almost certainly bad for central bank credibility in the long run.

It’s the right message, at the wrong time.

Four years ago, say, (when Mark Carney blazed the trail by introducing such guidance in Canada), it would have been a great idea, as we had just narrowly avoided financial Armageddon and thought it was quite possible that the economy had entered a permanent winter. Right now, however, things are very different; the green shoots of recovery are well above ground, and it’s precisely the wrong moment for central bankers to damage psychologies by telling us they’re not terribly impressed by our efforts and think they’ll have to keep rates low for years. I’d further posit that the fear of rates going higher is, across the economy as a whole, not the major pre-occupation for individuals and businesses. Nobody is afraid that rates will return to the 15 per cent we saw in the early nineties in the UK; borrowing costs of 6 or 7 per cent do not seem life-threatening compared to the present 4 or 5 per cent.

No yield curve forever also drives the bankers’ dream of a return to 3-6-3 banking even further over the horizon, (borrow at 3 per cent, lend at 6 per cent, and on the golf course with the client by 6pm). Instead, why not borrow at 0.5 per cent and use the money to buy Gilts at 2.25 per cent, with zero credit risk-wonderful for bank balance sheets, but not much help for the economy?

Meanwhile, investors with spare cash don’t find 0.1 per cent deposit rates too exciting and are happy to plunge into emerging market corporate bonds at 4 per cent - which, ironically, is just the sort of mis-pricing of risk that is spooking central bankers.

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.

Photo: Getty
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Jeremy Corbyn sat down on train he claimed was full, Virgin says

The train company has pushed back against a viral video starring the Labour leader, in which he sat on the floor.

Seats were available on the train where Jeremy Corbyn was filmed sitting on the floor, Virgin Trains has said.

On 16 August, a freelance film-maker who has been following the Labour leader released a video which showed Corbyn talking about the problems of overcrowded trains.

“This is a problem that many passengers face every day, commuters and long-distance travellers. Today this train is completely ram-packed,” he said. Is it fair that I should upgrade my ticket whilst others who might not be able to afford such a luxury should have to sit on the floor? It’s their money I would be spending after all.”

Commentators quickly pointed out that he would not have been able to claim for a first-class upgrade, as expenses rules only permit standard-class travel. Also, campaign expenses cannot be claimed back from the taxpayer. 

Today, Virgin Trains released footage of the Labour leader walking past empty unreserved seats to film his video, which took half an hour, before walking back to take another unreserved seat.

"CCTV footage taken from the train on August 11 shows Mr Corbyn and his team walked past empty, unreserved seats in coach H before walking through the rest of the train to the far end, where his team sat on the floor and started filming.

"The same footage then shows Mr Corbyn returning to coach H and taking a seat there, with the help of the onboard crew, around 45 minutes into the journey and over two hours before the train reached Newcastle.

"Mr Corbyn’s team carried out their filming around 30 minutes into the journey. There were also additional empty seats on the train (the 11am departure from King’s Cross) which appear from CCTV to have been reserved but not taken, so they were also available for other passengers to sit on."

A Virgin spokesperson commented: “We have to take issue with the idea that Mr Corbyn wasn’t able to be seated on the service, as this clearly wasn’t the case.

A spokesman for the Corbyn campaign told BuzzFeed News that the footage was a “lie”, and that Corbyn had given up his seat for a woman to take his place, and that “other people” had also sat in the aisles.

Owen Smith, Corbyn's leadership rival, tried a joke:

But a passenger on the train supported Corbyn's version of events.

Both Virgin Trains and the Corbyn campaign have been contacted for further comment.

UPDATE 17:07

A spokesperson for the Jeremy for Labour campaign commented:

“When Jeremy boarded the train he was unable to find unreserved seats, so he sat with other passengers in the corridor who were also unable to find a seat. 

"Later in the journey, seats became available after a family were upgraded to first class, and Jeremy and the team he was travelling with were offered the seats by a very helpful member of staff.

"Passengers across Britain will have been in similar situations on overcrowded, expensive trains. That is why our policy to bring the trains back into public ownership, as part of a plan to rebuild and transform Britain, is so popular with passengers and rail workers.”

A few testimonies from passengers who had their photos taken with Corbyn on the floor can be found here