Bank of England's MPC speech makers are all talk and no clear direction


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The procurement people at the Bank of England had best get in a bumper order of Strepsils. Members of the interest rate-setting Monetary Policy Committee have been delivering so many speeches that there will doubtless be a number of sore throats in need of soothing.

Eight of the nine have given their opinions on matters economic over the past week alone. Unfortunately, what they’ve had to say won’t have done anything to soothe those who worry about the only economics question the wider public really cares about: what’s going to happen to interest rates.

Ben Broadbent, the Bank’s Deputy Governor for monetary policy, was the latest of them. He served up a rather dry assessment of the labour market.

It may give you a clue to its character if I tell you that a colleague and I spent some time debating what it was he was actually saying, without being able draw any firm conclusions.

It’s true that he said he expected UK employers to start creating more highly skilled and highly paid jobs, bringing an end to the much criticised “low wage, low skill” recovery the UK has been experiencing.

This could be read as having an inflationary effect, and thus Mr Broadbent could be reinforcing the Bank’s forward guidance that a rate rise will be needed soon.

But you shouldn’t bank on it. Take the final paragraph of the concluding section of his speech. There was a “might”, a “maybe” or a “perhaps” in every sentence. And he finished by saying: “I guess we shall see.”

By contrast, the chief economist, Andy Haldane, was rather more blunt at the end of last week when he mused about UK interest rates being due for a cut. But that turbulent priest has been publicly slapped down by the Governor, Mark Carney, in the past, so we should also be cautious about reading too much into what he said. It would be all right if Mr Haldane were alone in stirring the pot. But they’ve all been at it, to a greater or lesser degree.

The MPC seems to have developed more factions than you’d find at a Balkan booze-up. Exactly what “forward guidance” does the MPC want to impart?

Market participants have had to make their own minds up. Having cast a wary eye on China’s economic turmoil and taken note of the US Federal Reserve keeping rates on hold, they have decided that a UK rate rise expected in February might now be off the table until the summer.

I guess we shall see.