Act in haste, repent at leisure, these are words the Bank of England MPC would do well to consider this week when they are widely expected to meet and move on interest rates for the first time in 87 months, only rather than raising them as was expected to be the case two years ago, expectations are pretty much nailed on that we could well see a 0.25% cut to the headline rate and potentially an announcement of more asset purchases.
That the market is pricing this in as a 100% certainty is largely as a result of the expectations that have been built up in the aftermath of June's historic Brexit vote.
In essence the central bank has boxed itself into a corner, and despite recent data should really be asking itself whether it would be wise to act at all this week.
Martin Weale's flip flop last month with respect to further stimulus along with chief economist Andrew Haldane's recent sledgehammer comment has raised the prospect that UK interest rates could head even lower, despite the fact that lending rates have already dropped sharply in the aftermath of the June vote.
Over the last few weeks we've seen a host of central banks fail to deliver on market expectations and this week it is highly likely that the Bank of England will do the same.
Quite frankly it remains far too early to establish what damage has been done to the UK economy as a result of recent uncertainty irrespective of what recent PMI and confidence data tells us. Proponents of stimulus this week will no doubt argue that this week’s awful manufacturing and construction numbers mean that the bank has to act, but just because we’ve seen a knee jerk plunge in consumer and business confidence doesn’t mean that we’ll continue to head lower.
As it is with rates already at record lows it is not immediately apparent what a further rate cut now would achieve, apart from reinforce the negativity surrounding the UK economy, which in turn could see any further measures backfire.
Last week's Q2 GDP numbers show that the UK economy potentially has more scope to adopt a "wait and see" policy with respect to further measures given interest rates are already at record lows, and credit is freely available.
If the new government sees fit to wait until its autumn statement to deliver new fiscal measures, surely it makes sense for the Bank of England to also wait to see what new Chancellor Philip Hammond delivers later this year and supplement policy that way.
Acting now in the absence of hard data runs the risk of the market tail wagging the policy maker’s dog, and could see any further action backfire in the same way the Bank of Japan’s recent policy measures backfired.
Given all these uncertainties it remains highly likely that Thursday's vote could be a split one given how high the stakes are and how little scope the central bank has on interest rates, which means there is a fair chance that the Bank may well fail to deliver on market expectations.
RBS's (LON:RBS) warning that it may have to start charging business customers for excess cash balances should be a salutary warning to the central bank of the possible consequences of a rash move. This may concentrate minds and break policymakers out of their ruinous groupthink cycle.
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