BoE Predicts Sterling Unpredictability

In a recent interview, David Miles, possibly the most cerebral and worldly member of the Monetary Policy Committee sat on the forex fence and predicted that it would not be easy to predict the direction of sterling during forthcoming months.

The follow-up question, also regarding sterling, cemented the absolute certainty that the economic future was unknown in the eyes of the BoE.

“Is it easy to affect [sterling] through policy?” - the interviewer asked. “Definitely not." replied Miles.

If I could just clarify the background to the interview; David Miles is on the Bank of England Monetary Policy Committee. The BoE is conducting a £175bn quantitative easing program to supposedly save the UK economy from a deeper and longer recession.

I would humbly suggest that before the BoE injected £175bn into financial institutions to help their chums in the City of London with their liquidity issues, they should have had a very good understanding of how that policy would affect the pound – and not commence a policy the consequences of which were “definitely not” predictable.

I don’t know what’s more concerning, the admittance of ignorance and helplessness or the fact that David Miles is probably the smartest member of the MPC.

Comments

[Solon]

I thought that there was a difference berween Quant Easing for their 'chums at the bank' and fiscal policy. What would Keynes say on this point? Better still, what would the Bank of Canada governor say to Goldman Sachs on this point, hmm? We need a consensus,

2009 Oct 04 01:09 PM