Bank of England minutes: What they REALLY mean

As is customary on Gold Made Simple News, whenever the BoE release their minutes we save you the trouble and read them and offer up a translation of what they really mean.

It’s at this point that we re-remind our readers the complete pointlessness of the entire minutes anyway, why? Becasue these minutes aren’t full minutes, but are rather sanitised for public consumption – read this for further details.

From the minutes of the meeting on the 5-6 September:

Trading volumes in financial markets had been unusually light during August, even allowing for seasonal variations. Market participants had remained focused on the prospects for changes in policy in the major economies, particularly in the euro area.

Obviously let’s not mention the rather obvious fact that when central bankers and politicians interfere with prices and change the rules at the drop of a hat the ‘markets’ begin to appear rigged, which results in people simply not wanting to trade anymore.

In the United States, interest rates had fallen across the yield curve towards the end of the month in response to heightened expectations of a possible further loosening in monetary policy.

Best say ‘possible’, wouldn’t want the public thinking that all this money printing was co-ordinated and we know exactly when and what the Fed is going to do.

In the United Kingdom, the majority of respondents to the Reuters survey of economists were anticipating a further expansion of the Committee’s asset purchase programme at some stage, though this was not generally expected to be announced at the September meeting.

Everyone know’s that this is coming in November, but let’s all carrying on the pretense because we all love ‘surprises’ after all.

Sterling had appreciated a little further on the month and was close to the top of the range it had traded in since the beginning of 2009.

Let’s pretend that sterling is appreciating, when we all know we’re just measuring inflated currency against inflated currency. When the real measure of value for sterling is used, that against gold, it’s down some 10% in the past 5 months.

The weak tone of data releases on the international economy had continued, and forecasts for growth in the major economies in 2012 and 2013 had generally been revised down. This weakness was more marked in indicators of manufacturing and trade, possibly reflecting a slowing in demand for capital goods against a backdrop of heightened global uncertainty, or a reduction in inventory demand.

Best start getting our excuses in for QEinfinity in now.

It was likely that activity in many euro-area countries was continuing to be held back by difficulties in financing public and external deficits. During the month, several regional administrations in Spain had applied to the central government’s Regional Liquidity Fund, and support had been announced for individual banks in both Spain and France. Further policy measures at an area-wide level were expected during the coming months. Alongside possible steps by the ECB to reduce strains in some sovereign debt markets, European leaders were due to discuss proposals to introduce a single euro-area bank supervisor and to continue the process of ratifying the European Stability Mechanism.

Difficulties caused by the fact they are bankrupt, but SSshhh, we can’t say that out loud.

The news from the United States had on balance been positive but did not suggest any material strengthening in output growth in the third quarter.

So naturally everyone can draw from this that the Fed’s QEinfinity program was simply another bailout for the banks and NOTHING to do with helping the economy. Much like it is over here, but just don’t pop that in the minutes dear boy, can’t have the plebs know what we’re REALLY about now can we.

Policymakers generally appeared to have scope to provide more stimulus if that were deemed appropriate. But it was likely that growth in the major emerging economies would for some time remain weaker than pre-crisis averages.

We love to state the bleeding obvious, after all how easy is it to press CTRL+P on a computer?

Oil prices had risen by 8% on the month. Although month-to-month changes of this magnitude were not that unusual, this was during a period of relatively weak global activity growth, suggesting it had been caused by supply-side developments. Global oil production had continued to be hampered by supply disruptions, and it was likely that investors were prepared to pay a premium to hold physical oil given the recent heightened tensions in the Middle East.

Ah, that’s it, if in doubt baffle them with BS, it was ‘supply-side developments’ and certainly NOTHING to do with all the massive unprecedented global printing… you got that, nothing!

That would be consistent with the impact on activity of the additional bank holiday for the Diamond Jubilee having been a little less than the Committee had previously assumed or underlying growth having been a little stronger.

We really are screwed next year when there isn’t that extra bank holiday – we’ve used it to excuse the poor state of the economy in all our published minutes this year. Oh well, we’ll worry about that next year.

 Measured GDP could be expected to rise sharply in the third quarter as the Diamond Jubilee effect unwound, alongside a possible small boost from the Olympics.

He-he, can’t believe we’re going to get away with making up a completely bogus economic term called “unwinding of  the Diamond Jubilee effect” -they really will fall for anything. We all know the ‘boost’ in GDP is just pure inflation and nothing else.

The fall in inflation over the previous year and the surprisingly strong rate of employment growth more recently had together alleviated some of the squeeze on real incomes.

Obviously best not mention that we haven’t hit our government mandated target of 2% “AT ALL TIMES” in nearly 3 years.

Uncertainty remained elevated and this would continue to discourage spending. The prospective rises in prices for petrol, household energy and some foodstuffs would dampen real income growth in the second half of the year, and the level of activity in the housing market had remained moribund.

All caused by us and our crazy money printing ways, but let’s just call it ‘growth’ and hope no-one mentions it.

Twelve-month CPI inflation had picked up to 2.6% in July from 2.4% in June. The increase had reflected a rise in the airfares component, which tended to be volatile, and an increase in the contribution of clothing and footwear price inflation following some earlier than normal summer sales.

Just remember ‘good’ inflation is us (like stocks and bonds), ‘bad’ inflation (like airfares and shoes) well, that’s just some random event and has NOTHING to do with the money printing at the BoE.

In line with the usual pre-release arrangements, the Governor informed the Committee that producer input prices had risen by 2% between July and August, while output prices had risen by 0.5%, both reflecting the recent rises in oil prices. These rises, together with the prospect of further increases in utility prices not directly related to wholesale energy costs, meant that CPI inflation was less likely to fall back further during the second half of the year than the Committee had thought at the time of the August Inflation Report.

What, so we’ve messed up our forecasting… again! It’s our little in joke so get over it!

Wage pressures had remained muted. Private sector regular pay in the second quarter had grown by 2% relative to a year earlier,

And with CPI inflation running at 2.6% people actually lost money… again.

 The Committee set monetary policy in order to meet the 2% inflation target in the medium term.

Can’t beleive that we write that every month and NOBODY ever points out that our legal mandate is in fact 2% CPI inflation “AT ALL TIMES”. One day someone in parliament might bring this up, but we doubt.

Nonetheless, the rise in oil prices and the probable increase in utility and some food prices meant that the near-term outlook was for a less rapid fall in inflation than the Committee had thought at the time of its August Inflation Report projections. The outlook for inflation beyond that point continued to depend on the strength of the headwinds confronting both demand and supply, and the effectiveness of policy measures in the United Kingdom and abroad in leaning against them.

And by less rapid, we mean it will start to go back up quickly – just like we want.

Measured output had continued to be affected by transient factors, obscuring the underlying path, and GDP growth in the third quarter would be boosted by the unwinding of the Diamond Jubilee effect.

That’s three mentions of the Diamond Jubilee this month – hands up who won sweepstake?

Overall there had been little news regarding the medium-term outlook for inflation. Against that backdrop, all members agreed that it was appropriate at this meeting to continue with the asset purchase programme announced at the Committee’s July meeting. For most members this decision was relatively straightforward, although some of these members felt that additional stimulus was more likely than not to be needed in due course, while others saw the risks to inflation in the medium term as being more balanced around the target. Over the next few months, the Committee would gain further insight into the underlying paths of both supply and demand. It could also take stock of the impact of past and prospective policy actions, here and abroad. For one member, the decision this month was more finely balanced, since it was not clear that the uncertainties about the medium-term outlook would be resolved to any great extent in the coming months and, given the weakness in demand, a good case could be made at this meeting for announcing more asset purchases.

And by due cause we mean this November.

29 The following members of the Committee were present:

Mervyn King, Governor

Charles Bean, Deputy Governor responsible for monetary policy [winner of the Jubilee sweepstake]

Paul Tucker, Deputy Governor responsible for financial stability [don’t mention Barclays or manipulation, he’s still a bit tetchy!]

Ben Broadbent Spencer Dale

Paul Fisher Ian McCafferty

David Miles [More Poseny than Posen and the new Ginger in Chief]

Martin Weale

Dave Ramsden was present as the Treasury representative [he made the tea - jolly nice it was too]

Related posts:

1. Bank of England minutes – what they REALLY mean
2. Bank of England Minutes: Inflation isn’t going to fall anywhere near as fast as we told you
3. Bank of England minutes: I’m sorry we haven’t a clue
4. Bank of England Minutes: All aboard the Inflation Express
5. As the CPI falls for a third month the Bank of England has still produced 41% more price inflation than they should

Link to this article: : http://www.goldmadesimplenews.com/markets/bank-of-england-minutes-what-they-really-mean-2-8014/

Posted by Thomas Paterson on Sep 19 2012. Filed under Markets. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.