View from City Road: An Old Lady playing the coy maiden

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The Independent Online
Interest rates are going to rise - but not yet. Now where did you last hear that one? Certainly long before yesterday's publication of minutes from the monthly meeting between Kenneth Clarke and Eddie George, which confirm what everyone knew already. At their meeting on 6 July (the minutes are not published for six weeks) they agreed that, while the case remains for moving sooner rather than later, the time has not yet arrived.

Since then there has been another meeting and we already know, thanks to the leaks, roughly what was said then too; pretty much the same as at the previous meeting. Like a coy maiden teasing her suitors, the Old Lady is keeping financial markets guessing about her base rate intentions.

While publication of the minutes is undoubtedly a quantum improvement on what went before, they have done nothing to dispel the uncertainty about the timing of a change in rates. The Bank's quarterly Inflation Report, the Treasury's monthly Monetary Report, and the delayed publication of the minutes are meant to add up to a new regime of openness. Yet, in its dealings with the financial markets, the Bank of England is still using the old-fashioned system of nods and winks.

Better-connected journalists and analysts are told, yes, rates will rise but, no, not before the end of the September sterling futures contract. In part this is to restore the damage done by the Bank's inept handling of the end-July Treasury bill tender, when a series of conflicting signals were sent to the market with predictably chaotic consequences.

The primary reason for publishing the minutes is to add credibility to monetary policy by demonstrating that rates are not being moved for political reasons. But a secondary purpose, which is to help markets gain a better understanding of policy, seems to be failing.

Six weeks late, bland, and possibly sanitised, the minutes seem like ancient history by the time they hit the streets. The tea leaves are all there but there's little to indicate how the Governor and Chancellor might want to read them.

Exactly what will trigger the inevitable increase in rates? We still don't know for sure. Presumably it will not be anything as sleazy as the timing of the Tory party conference.

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