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Thank You MPC - Admission of Guilt ?

20th November 2008 | back to article listings BACK    print this article PRINT

Nice to see the MPC admit yesterday that they considered our suggestion, and that of a couple of other right-thinking commentators, the other week to drop rates by a full 2% and indeed that they admit they wanted to do so. They only hesitated and dropped by a lower amount as a great drop in one go would be seen as panic, or perhaps loss of face. www.ft.com/cms/s/0/14a1e2f2-b620-11dd-89dd-0000779fd18c.html

Well yes - when you get things so wrong and try to correct things so quickly that is going to be peoples' perception, and indeed that is the reality of what happened. They completely misunderstood the real economy being affected by the credit crunch up until this September, a full 12 months since the first evidence started to show it was a danger and indeed beginning to happen. Or perhaps, as they hint, they were embarrassed to change direction too fast and to too great a degree. The latter possibility is quite worrying as it would suggest the that they knew what was going wrong but did nothing about it until actual data justified their case and made it easier to drop rates. Wrong or timid - neither is a palatable judgement on the apptitude of our National Bank.

Some commentators have said no-one saw this coming - I say rubbish and that more people than just the Bank of England, Mervyn King and the rest of the MPC (bar David Blanchflower) were asleep at the wheel when commenting on the evolution of this credit crisis.

Anyone who says they didn't see the credit crunch potentially leading onto a deep slowdown in the real economy over a year ago should consider whether they are in the right career. Steps could have been taken long ago to reduce the effects.

Clearly a 50% chance of a 1% base rate cut in December and if not it will be 0.5% with a further 0.5% in January. Good news for most property investors, homeowners and businesses with interest rates so low and most people benefiting from this in some way.

This news story has come from the property investment blog by Stuart Law, CEO Assetz plc.

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