Another Bank of England policymaker tells us not to take pay rises (after getting a large one herself)

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via notayesmanseconomics:

Early morning commuters to the City of London may have been surprise to see someone resisting the rain with a beaming It was of course the research student at the Bank of England who will have skipped to work anticipating being able to tell Bank of England Governor Andrew Bailey this.

Data from the UK’s Royal Institution of Chartered Survey’s (RICS) on January house prices showed new buyer enquiries were at their strongest in almost two years:

Measure of house prices rose to -18%, its highest since October 2022. ( Forex Live)

The RICS continued here.

“The UK housing market has seen a continued improvement in buyer activity through the early part of the year, supported by the recent easing in mortgage interest rates

Although sales volumes through much of the year ahead are likely to remain relatively subdued compared to the longer-term average, the outlook has now turned modestly brighter on a consistent basis over the past few survey reports.”

Career prospects are always improved by being able to tell the Governor how masterfully he has dealt with the housing market. Plus it will allow our research student to remind him of yesterday;s news. something which they may have considered to be a missed opportunity.

“The average house price in January was £291,029, up +1.3% or, in cash terms, £3,924 compared to December
“This is the fourth consecutive month that house prices have risen and, as a result, the pace of annual growth is
now +2.5%, the highest rate since January last year.”

Those are the house price numbers from the Halifax and there is more should our research student link the falls in mortgage rates to all the Bank of England support for banks.

“The recent reduction of mortgage rates from lenders as competition picks up, alongside fading inflationary
pressures and a still-resilient labour market has contributed to increased confidence among buyers and sellers.
This has resulted in a positive start to 2024’s housing market.” ( Halifax)

The Pound

If they are especially sharp they will have spotted this.

PoundSterlingLIVE – “We may now be entering a period of euro weakness, like what we saw in 2013-2015.”

This has consequences as shown below.

We may now be entering a period of euro weakness, like what we saw in 2013-2015. Back then, a wave of pressure on the euro pushed EUR/GBP towards 0.7000,” says Alex Kuptsikevich, senior market analyst at FxPro.

The call comes as the Euro to Pound exchange rate retreats back to 0.8520, (in Pound to Euro terms this equates to a rise to 1.1740). (

This presents another opportunity to tell the Governor how well he is handling things. The UK appears to be doing better than the Euro area.

“With interest rate changes on the agenda, interest is being drawn to the more buoyant economies where the UK has an advantage due to domestic demand,” he says.”

Sarah Breeden

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The appointment and indeed promotion of Sarah Breeden to Deputy Governor was one that intrigued me on two counts. Firstly she is a classic Bank insider and secondly I cannot recall her ever having any public views on monetary policy. A case of what in bureaucratic circles would be described as promoting the “right ” person. Correct me if I am wrong but this heads in completely the opposite direction to this.

David Roberts, Chair of Court, said: “It is crucial that the Bank continuously learns and adapts as an organisation. It is right that we take an independent and objective look at the processes which underpin the MPC’s policy decisions and I am delighted that Dr Bernanke has agreed to lead this work.”

The road above rather leads to this sort of view.

For services inflation to fall to levels consistent with target, some combination of a further moderation in labour cost growth and firms’ margins will be needed………

Labour costs make up a significant part of services firms’ costs. Some combination of a moderation in pay pressures and firms’ margins will be required for services inflation to return to more normal rates.

Yes her view is that the plebs need to take a pay cut. That is an interesting line of argument from someone who has just had a pay rise of more than £100,000 per year. According to the 2023 accounts she had a base salary of £192,259 whereas a Deputy Governor’s salary was £288,700. Plus she is a 1/50th member of a valuable pension scheme where she takes cash at what looks like it will now be £86.000 or so a year.

As to monetary policy Sarah in December told us this,

At that juncture, the question I was focused on was whether there was evidence of more persistent inflationary pressures which might mean we needed to tighten further.

Since then the main news ( PMI business survey) is that the UK economy is picking up and Sarah now tells us this.

As I have become more confident that persistence is likely to evolve as embodied within our forecast, I have become less concerned that rates might need to be tightened further. Instead my focus, and indeed the focus of many on the MPC, has shifted to thinking about how long rates need to remain at their current level.

As Darryl Hall and John Oates reminded us.

Take a look around
You’re out of touch
I’m out of time

Quantitative Tightening

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There has been a rather welcome development here. Regular readers will be aware that this was a disaster waiting to happen. It is hard to believe now that the Bank of England signposted interest-rates of 0.5% and 1% as being significant and then raised them to 5.25%! So this from the Commons Treasury Committee shines a light on things.

 In September 2022, the MPC voted to begin selling the Bank’s stock of QE gilts in the secondary market, following a strategy published the previous month, referred to in this report as ‘active’ QT………In September 2023, the MPC decided to undertake an additional £100 billion of QT over October 2023 to September 2024 (with passive and active QT accounting for around £50 billion each), which will bring the purchases of gilts down to around £650 billion.

Those who follow my Twitter (X) feed will know that I report the weekly ( Monday) sales. These mean that the Bank of England approach is very different to that elsewhere.

The Bank was among the first central banks in the world to embark upon active QT, and international experience in passive QT is also limited.4 Indeed, other major advanced-economy central banks, including the US Federal Reserve, European Central Bank and the Bank of Canada, are only proceeding with passive QT.

Sadly they do not really press on with challenging the issue of buying bonds at the top and now selling them at the bottom with at times very large losses, But it is a start.


This is a mixed period for the Bank of England. The economic news looks to be heading in its favour as the UK looks set to outperform the Euro area. Plus the domestic energy price fall set for April will bring inflation much lower and maybe with a following wind on target. But its policymakers retain the habit of putting their feet in their mouths via in this instance receiving a large pay rise before telling others not too.

Plus the whole QE/QT experience has turned into a shambles. They rushed into the UK bond market like headless chickens and now are panicking about the consequent losses created by their own interest-rate rises. Only the establishment can get away with such stupidity as anyone else would have for their P45 ages ago.


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