Wednesday, October 10, 2007
King - defiant on Northern Rock, cautious on rates
Posted by David Smith at 09:30 AM
Category: Thoughts and responses

The Bank of England and Financial Services Authority are battling it out over the Northern Rock affair. This is Mervyn King's latest defence of the Bank's handling of the crisis in the credit markets, together with a pretty clear signal that he will not be bending easily when it comes to monetary policy. The speech, delivered last night, is here.


Well, what Mr king says and what Mr King does, are two entirely different things right now.

You only have to look at the Northern Rock fiasco, to come to that (objective) conclusion. I'll believe when I see it - otherwise those puppet strings from goverment really do exist.

I expect a rate cut by early next year.

Posted by: Matthew at October 10, 2007 05:55 PM

You're not making any sense - and if there was a rate cut by early next year, as there might well be - it would prove nothing either way. The Bank is operationally independent, it sets monetary policy to achieve an inflation target set by the government. It is not independent in the sense that it can throw lender of last resort money at anybody without first asking the Treasury. It is after all taxpayers' money.

Posted by: David Smith at October 10, 2007 10:18 PM

The spread between 3-month LIBOR and SONIA futures is now lower than the equivalent in the US or euro area. Does this vindicate King's stance on the Northern Rock and money market crises?

I think so. And it suggests all that criticism Merv took from certain individuals in the city (step forward Bob Diamond) was wholly unjustified.

Posted by: Sell Everything at October 13, 2007 08:16 AM