Did Osborne really save the economy? Bank of England doesn't think so...
Tue 22 Jul 2014
Chancellor of the Exchequer George Osborne (R) is followed by Mark Carney, Governor of the Bank of England, as they enter the 'Lord Mayor's Dinner to the Bankers and Merchants of the City of London' at the Mansion House on June 12, 2014 in London, England. In his keynote speech the Chancellor is announcing new measures to tackle 'the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them'. The Bank of England 's prudent decisions after the financial crash helped ensure the UK's economic recovery took hold, a senior Bank economist has said. Paul Fisher, who is now head of the Bank's Prudential Regulation Authority , credited the central bank's policies like the quantitative easing stimulus package and the Funding for Lending programme with boosting banks' lending and restoring economic growth. "A number of our policies had very big powerful effects on the recovery phase, and, without doubt, things would have been much worse if we hadn't stuck to our guns," he told the Independent . ON THE BLOG: This comes as newly released minutes from the Bank's latest meeting of its Monetary Policy Committee in July revealed that one of its interest rate setters believed there was less risk of the UK's economic recovery being derailed by an early interest rate rise. The Bank's minutes suggested that an early rate rise would allow officials to see how families and mortgage holders cope with the increased cost of borrowing in the change from the UK's current historic five-year low of 0.5%. "A rise in Bank Rate at a time when the economy was growing strongly would facilitate a more gradual path thereafter and would allow the Committee to evaluate the sensitivity of households, firms and financial markets to
changes in interest rates, following a long period during which Bank Rate had remained unchanged," the minutes explained. Bank officials voted to keep interest rates at their current low, the minutes confirmed. Speculation and concern has mounted over when the Bank will start to raise interest rates as families and businesses would stand to be hit by the increased cost of borrowing. Some Bank officials, like chief economist Andy Haldane, argue that rate-setters should consider raising interest rates by the end of the year to remain "on the front foot". However Lib Dem business secretary Vince Cable recently warned officials that a premature rate rise could derail the recovery. "My immediate concern as business secretary is if these incipient inflationary pressures lead to a rise in interest rates sooner and further than is warranted by the economy as a whole, it could place in jeopardy our hopes for a sustained and balanced recovery."See also: Mark Carney's New Mortgage Rules Hit Young People Worst, Says Bank Nobel Economics Laureate Robert Shiller thinks so, and he predicted the 2007 house price crash. Ronnie O'Sullivan says a huge housing bubble (and crash) will happen. Or in his words: "Baby it's coming." The average price for a three-bedroom house in central London has increased by 729 a day over the last year, equivalent to a quarter of a million pounds, estate agency Marsh & Parsons said. The estate agent firm said the scale of house price inflation meant that prices rose by 19% since April 2013 to an average of 1.6 million, equivalent to 5,120 a week, or eight times Londoners' 658-a-week median salary. Less than one in ten properties in many parts of the UK are affordable to single house-buyers, according to the homeless charity Shelter. Meanwhile, three central London areas are completely unaffordable for couples with children or single people living on average wages: Kensington and Chelsea, Westminster and Camden. It's JUST a garage. This tiny lawn in Chelsea sold this month for 84,000, and it doesn't have planning permission or right of way. It sold for 53,000 last September - and you can't do anything on it at all. So says independent research commissioned by Shelter. That boy has already started on his first house... It's cheaper to commute from Spain than to live in London. Sir Jon Cunliffe, the Bank's deputy governor for financial stability, has warned that it would be "dangerous to ignore the momentum that has built up in the UK housing market." He also said that the housing market was the "brightest light" blinking on the dashboard of financial hazards that the Bank monitors. While arguing that Britain is not showing signs of a housing bubble, Broadbent admitted that it may be easier to spot with hindsight. "Bubbles are things that are things that are far easier to identify after the event than at the time," Broadbent told Radio 4's Today programme.