Confidence-wrecking forecasts: No one expects the Bank to change projections, but we shouldn’t underestimate the damage of gloomy forecasts, says ALEX BRUMMER
Under pressure: Bank of England chief Andrew Bailey
Not long ago, central bankers made decisions behind closed doors and a specialist group of watchers from the Fed and the Bank of England made a living predicting future moves.
In those times, it would take six weeks for the minutes of the US Federal Reserve’s open markets committee meetings to shed light on interest rate decisions.
At the Bank of England (before independence in 1997), it was the Governor’s eyebrow, and the Treasury’s winks and nods, that decided things.
Gordon Brown brought to an end the ‘Ken and Eddie show’ of the 1990s when, amid great cordiality, Chancellor Ken Clarke and Governor Eddie George sought to agree on how much we should pay on our mortgages.
The last two decades have seen great changes. Central bankers focus on clear communications in order to avoid surprises. The mystery is gone and Fed Chairman Jay Powell and Bank Governor Andrew Bailey emerge from their temples to reveal the secrets to assembled economic reporters, television cameras and social media.
Among the messages that emerged from Thursday’s deliberations was that the UK is forecast to slide into the longest recession in a century.
However, the Bank went on to say that it didn’t really believe the market’s forecast for long-term interest rates, so activity might not be so weak after all.
No one expects the Bank to change its projections. But we should not underestimate the damage that a gloomy forecast can cause. Business investment in the UK today is abysmal. And it certainly won’t be helped by the governor’s pessimism. Nor will it benefit from Downing Street leaks about how companies and shareholders can expect higher taxes on profits and dividends.
By now, one might assume that the combination of high energy costs and consumer prices, coupled with rising mortgage bills, might have stopped economic activity dead in its tracks.
However, despite the discouragement, there are current indicators that show that the country refuses to allow itself to be traumatized.
Construction is recovering with the S&P Purchasing Managers’ Index at a five-month high in November driven by homebuilding. The relentless dismal projections are taking their toll on new orders, which are receding to pandemic levels.
Elsewhere, October car sales rose for the third consecutive month, even if the comparable month in 2021 was erased by supply bottlenecks.
The November 3 bulletin from the Office for National Statistics suggests that consumers are determined to defy the consensus.
Retail footfall is up, online job postings are up sharply on the pre-pandemic average, petrol prices are 74 per cent below the same week in 2021, and the number of UK flights is rising and it is now at 87 percent of 2019 levels. Optimism prevails despite a gloomy narrative.
the voice of his teacher
China-based insurer Ping An is becoming increasingly strident in its battle to shake up the UK’s largest bank, HSBC.
He still wants a spin-off of the Asian business, demands more aggressive cost cutting and complains that senior management lacks experience in Asia.
HSBC rejects criticism from its 8.3 percent shareholder, pointing to cost-cutting initiatives and strengthening returns on its capital.
HSBC Chairman Mark Tucker, with a wealth of experience in China from his time at AIA, could do worse than shoot Ping An.
Despite listing shares in Shanghai and Hong Kong, the insurer’s ownership structure is obscure.
But as with all Chinese companies, Beijing exercises enormous control over public statements.
Who is really pulling the strings?
the dragon’s lair
Amid earnings disappointment at Warner Bros Discovery, the bright spot is Game Of Thrones prequel House Of The Dragon.
The lavish series premiered on Sky to great fanfare in London’s Leicester Square in August.
Most of the production took place at Leavesden Studios in Hertfordshire and was filmed on location in Cornwall.
The show is broadcast on Sky Atlantic in Great Britain and HBO in the United States.
Another unacclaimed triumph for the UK’s growing film and creative industry.