The Bank of England’s PR message is presently all over the shop. This almost certainly isn’t the fault of the actual PR people, but of decisions taken higher up, one suspects.
On Thursday the Monetary Policy Committee meets to make a decision on interest rates. If the Bank’s “forward guidance” policy was still functioning, the financial markets would be almost certain what was coming.
As it stands, neither the City nor the hacks that follow the Bank have a clue. We have opinions on what the Bank should do but not what it is going to do.
So the interest rate swaps market is similarly lost. Last week it was signalling a definite cut. This week it is 50-50 – it does not know.
This is entirely the Bank’s fault for allowing MPC members to spout off about the need for a cut before key post-general election data had arrived.
The danger now is that, in order to avoid losing face, the Bank cuts rates when it actually thinks no such move is necessary.
That cut in rates would signal that the Bank of England thinks the economy is in trouble. Which in turn damages confidence. Which in turn becomes a self-fulfilling prophecy.
Bad PR really can cost billions.
