For wonks who obsess about the inner workings of the Bank of England’s monetary policy committee, soon to meet eight times a year instead of monthly, this counts as a droll joke: “It is good to see the MPC taking direct action to address the UK’s productivity puzzle!” observed Samuel Tombs of thinktank Capital Economics.
Yes, indeed, too many unproductive meetings are the bane of many people’s working lives. As it happens, Tombs doubts that there is any merit in meeting less often. It’s a point of view, but the justification given in the review by Kevin Warsh, former US Federal Reserve official, seems solid: “Rarely would a single four-week period be sufficient to change economic assessments.”
Quite. Less time watching every flicker in the economic data sounds a better use of time. Eight meetings a year is how the US Fed operates already, and how the European Central Bank will from next year.
Tombs’ bigger worry is that the market could be overwhelmed by information under a new regime that will end the “drip feed” of data. Minutes of MPC meetings will be published simultaneously with policy decisions; thus, on four days a year, the markets will be bombarded with the Bank’s quarterly Inflation Report, a rate decision and the MPC minutes.
True, it’s a lot. But, the argument for the new arrangement again looks sound: it makes it easier for the Bank to communicate its thinking. Indeed, the current two-week delay between a rate decision, and the minutes that explain the decision, looks to belong to a gentler era. The justification, apparently, was that a fortnight was required for preparation, scrutiny and approval of the minutes. Too leisurely. If the job can be done in 24 hours, do it. Life is cleaner that way. One suspects markets will be able to handle the flood of data: processing information quickly is what they do.
Transcripts of MPC will follow with an eight-year lag. That’s a small blow for transparency, and a reasonable fudge between full disclosure and encouragement of robust debate.
In another reform, the Court of the Bank – the governing body – will become a so-called unitary board, with executives and non-executive working together like a board of a public company. That is long overdue. Accountability, at least in theory, works better when governor is not set up to be a benign dictator.
Finally, the minutes of the Court’s meetings from 2007-09 will be published, albeit in “appropriately redacted” form, in January. The Treasury select committee has been arguing for this for ages, rightly. How much real challenge was there to then-governor Lord King? It remains a topic of fierce debate. By way of a bonus, we may also learn how much members of the court really knew about collateralised debt obligations and all other exotic derivatives. If there are red faces, so be it.
As a package of reforms to boost transparency and accountability, it looks sensible.
Grexit redux
Greek prime minister Antonis Samaras’ gamble is looking more dangerous by the day. The local stock market has now fallen almost 20% since Monday when he called a snap presidential election. Greek three-year debt now yields 10%. In London, the talk is of “Grexit,” or Greece’s exit from the euro, being a real possibility next year.
The Grexit theory runs like this: Samaras will fail to get his candidate for head of state, former EU commissioner Stavros Dimas, elected. In the general election that would follow, the anti-austerity Syriza party will win on a platform of negotiating a further debt write-off. Furious eurozone powerhouses, especially Germany, will refuse to play ball. Default and exit from the euro will be on the agenda, if Syriza turns out not be less radical than its reputation.
That plotline is clearly not inevitable. Dimas might crawl over the line in the critical presidential vote on 29 December. But the worrying thought for some observers is that Samaras may have judged that the best way to deal with Syriza is to let it take office and let it fail for six months. The idea may make sense in terms of narrow Greek politics; but it would guarantee a fresh eurozone crisis in the new year.
Boots on the ground
You’ve got hand it to Stefano Pessina, master of negotiation. Having agreed to merge Alliance Boots with US firm Walgreens, the 73 year-old will be top man once again. Pessina will be interim chief executive, not just head of strategy. Since he owns almost 20% of the combined group, he’s a natural pick. But the deal is starting to look like a reverse takeover by Alliance Boots, the smaller company. Aside from Pessina himself, Boots operatives will lead all four divisions. For this, Walgreens paid a premium.
