Record number of UK businesses say weak pound

[Suff]

will force them to raise prices within months.

Well what a surprise. What could the BOE do?

Simple statement. Weak £ is now damaging business and likely to produce inflation at an unwanted pace.
Simple rise. 0.05% rise in the interest rate with promises of rises to continue on a monthly basis until the value of the £ recovers to a level at which UK inflation stabilises on a slow upward path.

That would completely reverse most of the losses and the trend. They would have precedent too. Business is strong, all areas are growing more than predicted, inflation is rising too fast for comfort and Oil is going up rapidly due to the weak £.

Will they do it?

Unlikely, that would be too much of a climb down. Also if they don't do it, then the projected economic impact will eventually happen, we will see some form of stagflation when they have to raise rates and there you are. The BOE will have, single handedly, damaged the UK economy just as much as they predicted Brexit would. Then they can blame Brexit and it's job's a goodun.

[Workingman]

Now let's see.

The £ plummeted because of the actions of the BoE; and Brexit had nothing whatsoever to do with it. Check.

The price of oil going up, and therefore the price of many of our goods, had nothing to do with OPEC cutting production, it was all the fault of the BoE. Check.

The triple whammy of the pound falling, the price of oil rising and the fact that oil is traded in $ making it more than more expensive than before is also the BoE's fault. Ckeck.

There was a time when the EU was to blame for all of the UK's ills, but now we are leaving the bloc another scapegoat has to be found: step forward the BoE. Check.

[Suff]

WM if you analyse the reaction after the Brexit vote, you will see the following.

Brexit shock dropped the £ to around €1.22 to €1.25 from around €1.33 - €1.35. That's fine and the £ was actually riding a bit high on expectations of a Remain win.

Enter the BOE who immediately, at the next meeting, started to talk the £ down. It dropped to around €1.18 but was again stable. Short term Building funds immediately saw a huge attempt for short term investors to get their money out, even though they knew that their profit was dependent on the sale of the properties they had funded.

Enter the BOE, again, at the following meeting where they dropped interest rates and raised QE. Also saying that their "forward advice" was another rate cut at the next meeting.

Queue market panic, £ dropping to €1.08 and the currency short traders building up such a huge head of steam that it will take a positive rate move to shift the £ upwards now.

The £ was quite rightly high against the € given the interest rate differential of -0.4% for the € and 2.5% for the £. In fact had this been a different decade the € would have been punished into the ground for that move.

What was sentiment at the time? That the € would reach parity with the €, parity with the $, that the £ was a lost currency, a decade of recession, all the doom and gloom of the world. Is it any wonder that the £ was trashed and that businesses have felt the price increase before really seeing a large boost in export growth to balance it out.

The price of oil is the price of oil. Nobody in business, who needs oil, does so without hedging nowadays. So any hike in the rate of oil will not be felt fully till 6 months to 1 year from the time of the rise. The current rise in oil prices will gradually intrude into British manufacturing, excepting transport costs, so it is not quite the impact they are making of it. No the rise in costs is almost entirely driven by the crash in the value of the £ and mainly because currency hedges are beginning to run out.

Should the BOE raise rates even 0.01% all of that would change, the £ would jump, even for a short time and companies could re-hedge before the £ slid back again.

Are they going to do that? No, of course they are not. Because then they would have been proved to have been totally and completely wrong. What are they going to do? They're going to hold onto this ridiculous position they have taken for so long that they damage companies and actually start to cause the damage they predicted. They won't act until they are forced to and, if the last two decades has proven anything, it has proven that central banks forced to act are far less effective than central banks who act proactively to head off a situation they see is developing.

So, yes, I blame them for the mess we are in. The correction in the value of the £ was acceptable and could have adjusted itself if the BOE had not been a full and willing partner of Project Fear. Because it was a willing partner, it acted as if Project Fear was reality, without evidence and without justification.

Now I'm just calling them on it.

This is not a "blame the BOE for all our ills" instead of the EU. There is plenty more to call the EU on once we get into actual triggering of A50 and the nuclear meltdown in Brussels begins.

[Workingman]

Well I suppose that bogeymen are necessary. They do, after all, remove us from reality and at the same time provde a convenient scapegoat where we can lay blame.

There is no doubt that the BoE made mistakes, but let us be brutally honest. The handling of the populist promise referendum and the shock result of Brexit were the catalysts of most of the things we see today. The BoE was only reacting to them.

The other things, OPEC and Trump etc., were outside of the influence of either the EU or the BoE, but why not blame them anyway?

Never mind, we will soon be out of the EU and another bogeyman will have to be found. Trump: anyone?

[Suff]

Actually Trump raised the value of the £ against the $ and stabilised it. But we can blame him if we want..

The BOE didn't react, it started a chain of events which were pre planned. It was totally and completely wrong to do that when Cameron resigned and Osborne went. There is no getting around that, mistakes are not deliberate, they are unintended.

[Workingman]

Trump did not raise the £ against the $, he isn't in power yet; it was the spivs running round for a quick buck. However, when he does take the reins his economic policies could hit everyone - we hold our breath.

I have already admitted that I accept the BoE made mistakes, but to claim that it was, and is, actively taking steps to damage the UK economy beggars belief.

[Suff]

I have already admitted that I accept the BoE made mistakes, but to claim that it was, and is, actively taking steps to damage the UK economy beggars belief.

Actually, not only is it not beyond belief, it is an accusation which is increasingly being laid at the feet of the BoE by eminent economists.

I didn't think that one up, I repeated it.