Bruce Janman and I have just attended a meeting with an Agent of the Bank of England; and a very interesting event it was too, because her job is to talk with businesses in the East Midlands in order to gather information that is fed back to the Monetary Policy Committee (MPC), as part of their deliberations.
You would think that this was very much a “tell” meeting, where the Old Lady of Threadneedle Street spoke from on high and listened to nobody – but nothing could be further from the truth – more of which later. In fact, it was made very clear to us that views passed back through the regional Agents is influential (but not necessarily decisive) in the MPC’s deliberations. If course most of the members are non-bank employees and therefore have their own antennae out. But it is useful to know that there is a concerted effort to find out what business people think.
Whatever happens on Thursday’s meeting will not be influenced by our discussion on Tuesday; the timescales are too short. But in any event, our input about the way high street banks are treating customers – both individual and corporate – was more systemic than to do with interest rates.
Actually, what the BofE does with interest rates will be unlikely to filter through to mortgages and corporate borrowing, because the retail banks are still in desperate straits and need to build up their reserves before they can start operating in the way that the economy needs. That is why they are so reluctant to pass on the BofE’s rate cuts and why the work of the MCP has been marginalised.
What was most telling about the Agent’s comments was that they really do understand the pain that people are going through and “some of the best minds in the UK are working towards resolving the current economic crisis.” Because this lady was not a politician, I found myself believing her and feeling more confident about the future.
I also think it was helpful to know that they really are listening to what people say; their programme has enabled them to soften the somewhat “rose tinted spectacle” view put over by the Treasury and their realism is refreshing; not just about the likely length of the recession, but also about how little they can influence real interest rates, so that they are aware of the need for other actions. After all, their primary target is to keep inflation on target and this does not include allowing it to go negative for any length of time, which would be just as damaging to the economy as having it at a sustained high level.
Have your say
The upshot of this meeting was that it was agreed that there would be a future more formal discussion at some time in the not too distant future. So if there are any views you would like to have expressed (or questions asked) please let Bruce know as soon as possible.