Against this background, the Monetary Policy Committee has continued to get its selection about right, mainly for the wrong reasons - a bit like Michael Vaughan winning the second test when he cannot stay at the crease for more than a few balls.
As we now know, or at least think we do, output was slowing a lot quicker last year than the Bank thought it was when interest rates were being ratcheted up. The rise in the oil price and the deceleration in consumer spending caught the MPC off guard. Now rates are coming down, the forecast is for growth to pick up more strongly in the medium term than the Bank thought would be the case in May when a rate rise was still on the cards and inflation to remain only a touch above its 2 per cent target.
As Mr King never tires of reminding everyone, however, a forecast is not a number but a probability distribution and the chances of hitting the middle stump are as remote as a Shane Warne off day. In the Governor's batting line up, asset prices and consumer confidence have been moved down the order. The opening pair driving growth in the medium term are a lower exchange rate and buoyant equity markets, up 10 per cent since the Bank's last Inflation Report three months ago. Quite why the Bank should believe an increase in the value of one asset (shares) will fuel growth when it has consistently denied any relationship between the value of another (houses) and consumer spending, is unclear.
What does this all mean for interest rates? The hint from the Bank is that the markets have got too far ahead of themselves by pricing in a further series of small reductions (please don't call them fine adjustments). Mr King can't help them either way. You might as well ask him who is going to win the Ashes. You'd probably get the same answer.
Protect and survive is motto for the City
Anyone who saw Dirty Bomb, the BBC's fictionalised account of a terrorist attack on the City, will know what immense damage could be wreaked on London's financial centre if the nightmare ever comes true. UBS's headquarters next door to Liverpool Street station would become a wasteland for years. ABN Amro's giant glass edifice around the corner in Bishopsgate would be turned into a ghost town.
An attack on Canary Wharf, where The Independent's offices are located, would be no less devastating. A large part of the City has moved east in the past five years and today HSBC and Citigroup rub shoulders with Lehman Brothers and Credit Suisse in what has become London's new financial district.
The Square Mile's most senior policeman James Hart, commissioner of the City of London Police, told the Financial Times yesterday that it is a matter of when, not if, an attack occurs. His warning echoes that delivered by his counterpart in the Metropolitan Police before the July 7 and 21 attacks on the London transport system.
Ironically, Mr Hart's assessment comes just as the FTSE 100 index reaches heights not witnessed since before the September 11 attacks on New York and Washington. After an initial and short-lived panic, the markets shrugged off the July 7 attack and recovered even more swiftly from the attempted bombings of 21 July, for the brutal truth is that they quickly discounted the economic impact of the atrocities as attention turned back to the underlying factors driving stock prices higher - robust world growth and rising profit margins. So far, the corporate sector at least has been able to take the deflationary effect of high oil prices in its stride.
Dirty Bomb dwelt on the events leading up to the attack and its immediate aftermath but Mr Hart is more concerned about the long-term fall-out and the City's ability to withstand and recover from such an onslaught on its infrastructure.
All the major financial houses should have disaster recovery plans which enable them to re-boot their systems and continue trading, remotely if necessary, in the event of business disruption. The businesses Mr Hart is more concerned about make up the supply chain on which the largest companies depend and here, the picture is less reassuring, with emergency plans in place for perhaps only half of all businesses. Even in those large companies where safeguards are in place, Mr Hart bemoans that fact that chief executives and managing partners are happy to leave it to contingency planning managers.
Prevention is better than cure but the City's ring of steel can never be 100 per cent successful in keeping out the determined and well-prepared terrorist. If Mr Hart is right, then the Square Mile has yet to face its sternest test.
A WEEE problem at the DTI
The Government may have promised to cut the amount of home-grown red tape strangling business, but there is less it can do about the deluge of regulation arriving from Brussels. The latest example is the Waste, Electronic and Electrical Equipment Directive or WEEE for short, which requires manufacturers and retailers of mobile phones, computers, dishwashers and the like to dispose of them in an environmentally sound fashion when they reach the end of their lives.
The instinct of many householders will be to take their broken toaster to the local dump and throw it on the pile when the bread starts coming out carbonised. But WEEE requires the humble toaster to be streamed, recovered and recycled or treated. It's going to cost industry £300m a year so the matter is not trivial.
The Dutch and the Irish have seemingly cracked the problem but with just five months to go before implementation of the directive, the good old Department for Trade and Industry is yet to publish the necessary regulations or the guidelines industry will need to operate by. The DTI has now panicked and put back the introduction of the directive until June next year - the second time it has had to delay introduction.
If this was a one-off it would be bad enough. But over at Defra, the disease is even worse. Last year's implementation of the Landfill Directive was a nightmare with thousands of sites finding themselves unable to accept hazardous waste literally overnight. The department failed to learn the lesson and this year's introduction of new hazardous waste regulations requiring thousands of businesses to register with the Environment Agency, turned into a similar disaster when its website kept crashing.
In some respects, the WEEEE debacle is a re-run of the End of Life Vehicle Directive which only came into effect after the car industry had burnt a lot of rubber lobbying the DTI to get its act together. The EVLD is working reasonably well, but only because the price of scrap metal is making the economics work. When the price falls, as it surely will, then the shortcomings of the scheme will become apparent and the car industry will probably begin to screech. But that's another story...Reuse content