Wednesday, December 17, 2008
Bank unanimous as claimant count tops 1m
Posted by David Smith at 10:15 AM
Category: Thoughts and responses

The Bank of England's December minutes showed a 9-0 vote in favour of cutting Bank rate from 3% to 2%, as expected, and analysts have concluded that the discussion was consistent with the monetary policy committee (MPC) following the Fed by cutting rates all the way down to zero. They may be right, though there are one or two notes of caution in there.

The Bank was concerned to avoid an "excessive" fall in sterling, and "the Committee agreed that Bank Rate was not the right policy instrument to tackle supply constraints in the credit market. Further measures to underpin lending growth would be needed." On the decision to cut, the minutes say: "A cut of 100 basis points would mean that the level of Bank Rate would have been reduced from 5% to 2% in just 8 weeks; given the uncertainty inherent in the transmission mechanism, it was difficult to be certain that rates needed to be cut by more or faster than that." The minutes are here

The jobless figures were, as expected, gloomy, with the claimant count climbing above 1m, to 1.07m, after a big rise of 75,700 in November. The Labour Force Survey measure rose, if anything, somewhat less than expected, climbing by 137,000 in the three months to October to 1.86m. More here.