Speaker 1: His chance of the Quasi Quati says the Bank of
Speaker 1: England would be responsible for any market in volatility after
Speaker 1: its bomb buying program ends, and that infusion, I think
Speaker 1: comes between the financial side of the Bank of England
Speaker 1: and the monitary side of the Bank of England, which
Speaker 1: are now trying to do different things. They're trying to
Speaker 1: hold things together as best they can and trying to
Speaker 1: maintain postability and at the same time address financial stability
Speaker 1: issues with his other instrument Monday. But this is going
Speaker 1: to get tense perhaps. Yeah. So you've got both the
Speaker 1: Prime Minister and the Bank of England. There you have
Speaker 1: the sounds of investors, fund managers, analysts, everyone talking on
Speaker 1: Bloomberg over the last month, throughout the remarkable political and
Speaker 1: financial chaos we've all been witnessing. Of course, everyone's been
Speaker 1: questioning throughout all this the credibility of the Bank of England.
Speaker 1: So where are we now, guilt back to where they
Speaker 1: were actually before Quasi Kwarteng's budget. Liz Trust of course
Speaker 1: did not survive as Prime Minister, but still sitting over
Speaker 1: the road from a here a Bloomberg HQ at the
Speaker 1: Bank of England is Governor Bailey. So We're going to
Speaker 1: ask the question this week, did Andrew Bailey in fact
Speaker 1: fuller blinder? I'm David Merritt. This is In the City,
Speaker 1: Bloombergs podcast, connecting you to these stories and the voices
Speaker 1: of the heart of the city of London. You followers
Speaker 1: of France scenes Instagram or no, she's still in New
Speaker 1: York City in her Halloween costume, no less, but here
Speaker 1: with me in the London studio. I'm joined by Bloomberg
Speaker 1: reporter Phil Audrick and Bloomberg Television Economics and Government correspondent
Speaker 1: Lizzie Burton. Welcome Phil and Lizzie back to in the City.
Speaker 1: But before we get going to discuss I just it's
Speaker 1: just been pointed out to me by my producer that
Speaker 1: the phrase pull a blinder is apparently not internationally recognized,
Speaker 1: and she's got an article about a t eight very
Speaker 1: British phrases that will confuse anybody who didn't grow up
Speaker 1: in Britain. So we're gonna have to define what we
Speaker 1: mean pull a blinder. Lizzie, can you have a go
Speaker 1: at defining what we mean by that? Pulled it out
Speaker 1: the hat? It was he was a walking comms crisis
Speaker 1: and now he's shown how shown how it's done. There
Speaker 1: we go. So would you agree with that film that
Speaker 1: Andrew Bailey is now showing the world how it's done. Yeah.
Speaker 1: The handling of the ld I f s was pretty
Speaker 1: pretty impressive by the by the Bank of England. They
Speaker 1: used a market intervention tool that they never used before.
Speaker 1: It worked, It stabilized along into the guilt market. They've
Speaker 1: started quantitative tightening, so they're starting to sell guilts that
Speaker 1: they bought during the sort of easy years of after
Speaker 1: the financial crisis that has never been tried before. Days
Speaker 1: after this near catastrophe and markets they're able to do this.
Speaker 1: So all of that would suggest that the Bank of
Speaker 1: England has has pulled a blinder here. I think that's
Speaker 1: I'm swelling with pride. What do you think, Lizzie de agree?
Speaker 1: I mean, just throwing it back a bit. The reason
Speaker 1: that I think he pulled a blinder was because Andrew
Speaker 1: Bailey said that this emergency intervention to help out pension
Speaker 1: funds was only going to be temporary, and then you
Speaker 1: had the Chancellor at the time, Quasi quarteng saying that
Speaker 1: if the market termoil continued after the deadline, then that
Speaker 1: was a matter for the Bank of England, so a threat.
Speaker 1: And Andrew Bailey was really saying, get your act together,
Speaker 1: pension funds, and then what it really meant was get
Speaker 1: your act together government. They seemed to liquidity improved and
Speaker 1: it made Quasi Quarteng look like he'd lost to Andrew
Speaker 1: Bailey in the end. Yeah, I mean that it all
Speaker 1: happened in Washington during the IMF meetings, and it was
Speaker 1: where it was. It was it was at the event
Speaker 1: where he where Bailey said, we are ending this temporary
Speaker 1: guilt bye program on Friday as planned. We've announced that
Speaker 1: we will be out by the end of this week.
Speaker 1: You've got three days left. Now you've got to get
Speaker 1: this done, which was that was also when Quarting said
Speaker 1: I'm not going exactly and then and then literally the
Speaker 1: next day, Quarteing's pulled back to the UK, sacked on
Speaker 1: the Friday, and and the government then changes its fiscal policy,
Speaker 1: which was what was unsettling markets. You spoke to speaking
Speaker 1: to bankers and investors in Washingtons big ancillary convention called
Speaker 1: the International Institution Cycle Finance Meetings, and they were all
Speaker 1: saying the problem is not not you know, necessarily what
Speaker 1: is happening in markets. The core of the problem was
Speaker 1: the fiscal plan that was the mini budget. They have
Speaker 1: to deal with that, and Bailey did kind of give
Speaker 1: the government a very strict deadline to address this and
Speaker 1: they responded and of course it caused complete mayhem at
Speaker 1: the top of politics. And let's not forget what's so
Speaker 1: embarrassing for quarteng and Trust is that they spent the
Speaker 1: whole summer trashing the Bank of England and saying that
Speaker 1: the BOE didn't do enough to fight inflation, that it's
Speaker 1: mandate needed reviewing. And then they before they you turned
Speaker 1: on the whole budget sack Quarte and Trust went as well.
Speaker 1: They had to go cap in hand to the BOE
Speaker 1: and say it's independence with sacrosanct and basically dropped the
Speaker 1: mandate reviews. It's just exhausting and I think people listening
Speaker 1: to this um will be you know, their heads are
Speaker 1: spinning right like all of ours were tracking this. So
Speaker 1: just diving this back to where we when we all
Speaker 1: are sat down in the summer, the Tory leadership campaign
Speaker 1: was in midflow and as you said, Lizzie, sort of
Speaker 1: a lot of barbs are being thrown around. We discuss,
Speaker 1: didn't we how the bank was under attack by the
Speaker 1: Tory Party. The Bank of England persisted beyond any rational
Speaker 1: interpretation of the data to tell us that inflation was transient.
Speaker 1: I think we need to look at the best practice
Speaker 1: around the world, the countries who have been most successful
Speaker 1: at controlling inflation, for example, the Bank of Japan. I think,
Speaker 1: Liz Trust use the phrase bean counters right about the
Speaker 1: people who are too obsessed with balancing the budget or
Speaker 1: maybe reining in inflation um And you know the bean counters,
Speaker 1: as we've now seen bit back, didn't they big time?
Speaker 1: And there they had now won the argument. But could
Speaker 1: you just sort of spell us out a little bit
Speaker 1: for the listeners to explain how we got here right now?
Speaker 1: You know you mentioned Phil that the banks started tightening
Speaker 1: on the quantity the contract of tightening before anyone else,
Speaker 1: and then it had to do this emergency measure. But
Speaker 1: can we just give everyone a bit of a timeline.
Speaker 1: Liz Trust wins, She announces that mini budget with quasi
Speaker 1: quateng tell us talk us through what happened in the
Speaker 1: next couple of weeks. Well, was the queen died? Of course,
Speaker 1: that was the integratory He had basically ten ten days
Speaker 1: of zero government and then uh and then and then
Speaker 1: literally just within a few days the mini budget was
Speaker 1: was out and um it was. The bizarre thing was
Speaker 1: that a lot of the mini budget had been trailed
Speaker 1: in advance, like thirty five billion of the forty billion
Speaker 1: tax cuts was trailed in advanced. But the tone of
Speaker 1: the the tone of the statement, the fact that the
Speaker 1: Office for Budget Responsibilities, the chief being counters for the
Speaker 1: UK were not were not involved in this. So there
Speaker 1: was no sense of forecast uh, and there was there
Speaker 1: was there was no there was no watchdog who was
Speaker 1: just who act that the head first in quasi quatting
Speaker 1: did on becoming chancellor. So um, there was no one's
Speaker 1: mark their homework. They pushed back and they've lost exactly
Speaker 1: And so Scholar really knew he had deep connections with
Speaker 1: the markets, he had deep knowledge of financial crisis, having
Speaker 1: been there during the two thousand and eight two thousand
Speaker 1: and nine financial crisis. And so they lose all this
Speaker 1: expertise and and they deliberately sideline the people who can
Speaker 1: who can basically mark the government's homework. Um and uh,
Speaker 1: and of course the markets just suddenly here they get
Speaker 1: this the tone from Quarteng was like, we're going to
Speaker 1: be ambitious and we're pushing ahead. He completely ignored what
Speaker 1: was happening in global markets at the time, which was
Speaker 1: generally interest rates were rising, and the higher interest rates
Speaker 1: obviously increasing debt servicing costs, and so the sustainability of
Speaker 1: the public finances. You know, there's going to be questions
Speaker 1: about it. There was apparently thirty billion of headroom. He
Speaker 1: spent the lot then went beyond it, and actually the
Speaker 1: real picture was probably that the thirty billion of headroom
Speaker 1: had shrunk because we were looking at recession and I
Speaker 1: are interesting say at the time, markets will do what
Speaker 1: they and exactly and so there's this kind of turning
Speaker 1: point at them Ani budget where everybody has seen, has
Speaker 1: listened to the words, and suddenly you see it written
Speaker 1: down that they don't care about the you know, these
Speaker 1: these issues, and the market just literally just flips, completely flips,
Speaker 1: and you have you have these immediate that collapse in
Speaker 1: the power to record low like historic low ever and
Speaker 1: and this and this spike in government borrowing costs which
Speaker 1: caused complete catastrophe at this long end of the market,
Speaker 1: which blew up these ld I funds. That was the
Speaker 1: key thing, wasn't it. This is how you mentioned ld
Speaker 1: I just to explain it over means this is this
Speaker 1: is the pension's market, right. The crisis in the pension's
Speaker 1: market was linked to the surge and boring costs the
Speaker 1: long dated UK government debt, And that's what really freaked
Speaker 1: everybody out, wasn't it. Yeah, because they had collateral demands,
Speaker 1: so that when huge collateral demands, so that when prices
Speaker 1: fell and yields rose to raise the necessary cash, they
Speaker 1: had to sell more guilts. It created a doom loop
Speaker 1: and it was all about the pace of this money
Speaker 1: floating out of the door, not really the level. And
Speaker 1: that's what the Bank of England happened. That's when the
Speaker 1: banking woke up, right when the well, I should be fair.
Speaker 1: I'm sure they are awake all throughout right, but that's
Speaker 1: when they had to take really quite serious action. Remember, Phil,
Speaker 1: we were warned about the market reaction. We had Martin Real,
Speaker 1: the former Bow policymaker on Bloomberg TV, not a headline hunter.
Speaker 1: As Phil putt it uncounter. He utimate. He said there
Speaker 1: was going to be a run on the pound. And
Speaker 1: this was the night before And I must say I
Speaker 1: expect the same sort of thing will happen with Fartean's policy,
Speaker 1: that they'll probably be all I wouldn't like to say when.
Speaker 1: They'll probably be a clear run on the pound, and
Speaker 1: then the Bank of England will be forced to put
Speaker 1: up interest rates to stabilize the exchange rate. Much as
Speaker 1: and former Chancellor Philip Hammond came on, he said, the
Speaker 1: market is watching, the markets are looking very very closely
Speaker 1: at political pronouncements and the UK does face some serious headlings.
Speaker 1: He was encountering. They were all right right lining up
Speaker 1: to warn everybody. Well, in the end we all know
Speaker 1: what happened, right, Liz Trust had to first of all
Speaker 1: fire her chancellor and then in the end her entire
Speaker 1: political project was in tatters and she to resign as
Speaker 1: well and became the shortest tenured prime minister in British history. Um,
Speaker 1: at the Bank of England, can you just explain a
Speaker 1: little bit more about what they had been through, because
Speaker 1: of course they were about to start quantitive tightening, and
Speaker 1: that was the plan to start selling again. The vast
Speaker 1: reserves of UK bonds had built up nine billion pounds
Speaker 1: since the financial crisis. The first central bank to go
Speaker 1: ahead and do that, but then they had to suddenly
Speaker 1: reverse Veriot on that didn't they around to to save
Speaker 1: the pension's market. I mean, I remember on Bloomberg Television
Speaker 1: that day we were calling it quantitative confusion because we
Speaker 1: weren't sure which way they were going to turn. Can
Speaker 1: you give us a bit of insight what was going
Speaker 1: on in the bank at that time? Well, I mean,
Speaker 1: so when we talk about barely playing a blind, I
Speaker 1: think I think you should distinguish into two periods. So
Speaker 1: there was the period of the immediate crisis after the
Speaker 1: mini budget, and I think that was dealt with, you know,
Speaker 1: a series of events that were pretty disastrous. They handled
Speaker 1: it very well. Prior to that. They've had years again
Speaker 1: on top of areas of the market where they could
Speaker 1: see potential in stability and also to build proper functioning
Speaker 1: tools to fix markets when they absolutely need to in
Speaker 1: a crisis, and they and I'd say that they can.
Speaker 1: They failed quite considerably at that end, you know, in
Speaker 1: terms of the preparation, in terms of the in terms
Speaker 1: of the oversight. It's the financial Stability Mandate, financial stop
Speaker 1: another financial crisis in COVID there was this dash for cash.
Speaker 1: Bailey has since in recent weeks conceded that that that
Speaker 1: what the bank did then was a two billion pounds
Speaker 1: quantity of easing a bond purchase, which was basically exactly
Speaker 1: the same as what they did after the ld I
Speaker 1: crisis in the last few weeks. So they bought guilts
Speaker 1: off market participants directly, and that was presented as a
Speaker 1: as a quantitative easy mechanism back in the dash for
Speaker 1: cash days in at the start of the pandemic, because
Speaker 1: monetary policy had to be loosened at the same time,
Speaker 1: and so they were loosening monetary policy, so doing normal QUEI,
Speaker 1: but also at the same time it was serving a
Speaker 1: market stability function. Now, they knew at the time that
Speaker 1: there would be there would be a day when interest
Speaker 1: rates were rising when QT was happening, so quie was
Speaker 1: being sold and they would get a market blow up,
Speaker 1: and the only thing that they could do would be
Speaker 1: to buy guilt. So they would effectively restart QUEE on
Speaker 1: a financial stability mechanism rather than a montary policy mechanism.
Speaker 1: And they knew this would cause vast confusion, but they
Speaker 1: didn't get on top of this matter. And and I've
Speaker 1: been told that people senior policy makers in the bank
Speaker 1: were talking in sort of March around that time about
Speaker 1: them needing these two buckets. They needed to have blue
Speaker 1: queue and red QUEI and and blue QUEI would be
Speaker 1: normal monthly policy queie and red QUEI would be this
Speaker 1: financial stability mechanism. But the matrix right, which, so what
Speaker 1: are you gonna do? But they needed to communicate this,
Speaker 1: They needed to tell everybody beforehand. They needed to design
Speaker 1: a tool, and they were talking about this, and there
Speaker 1: was there was no formal disclosure of all of what
Speaker 1: was going on. They didn't have a to Like they
Speaker 1: have other funitial stability tools, like they've changed the borrowing
Speaker 1: requirements for more mortgages to make it harder to worre
Speaker 1: they did a few years ago. They have these particular tools.
Speaker 1: People know about them, and this one just was like,
Speaker 1: you know, the king of all financial stability tools go
Speaker 1: into the markets by guilt rescue everybody indiscriminately put the
Speaker 1: taxpayer at risk fundamentally, although it actually looks like with
Speaker 1: this l d I stuff, they're going to make a fortune.
Speaker 1: And but it hadn't been communicated and they didn't really
Speaker 1: have have it properly set up. So in that respect,
Speaker 1: it was bad, but in the actual crisis they then
Speaker 1: just sort of unleashed everything they knew they were going
Speaker 1: to have to do, and they did it very well
Speaker 1: and the outcome has been to stabilize them. I mean,
Speaker 1: you know, thinking about the outcome right, even chaos behind
Speaker 1: the scenes. But you know, the market is back, as
Speaker 1: I said, guilt yields are back now at the long
Speaker 1: end of the curd, back down to where they were
Speaker 1: before the Mini budget. You know, we've been talking a
Speaker 1: lot about what sort of permanent scarring is there in
Speaker 1: terms of the guilt market, in terms of London's reputation,
Speaker 1: in terms of the Bank of England. But isn't it
Speaker 1: the case now that things are sort of back to
Speaker 1: where they were and its business as usual. Well I
Speaker 1: did an interview with the Trade Secretary kemmy baden Ark
Speaker 1: which suggests to me that we're still a little bit
Speaker 1: perhaps in the trust era, because she was criticizing the
Speaker 1: Office for Budget Responsibility. She said that it's forecasts are
Speaker 1: not always right. Yes, I do dispute the bas forecast
Speaker 1: because what happens with trade depends on the actions that
Speaker 1: I am my colleagues across government to take right now
Speaker 1: the o b R is probably making a forecast based
Speaker 1: on how we used to do things. They don't know
Speaker 1: how we're going to be doing things, so I think
Speaker 1: we wait and see. We were talking about whether the
Speaker 1: o brs forecasts on Brexit mean that the Trade Department
Speaker 1: ought to reconsider the relationship with the EU, and she
Speaker 1: was referring back to her time as a Treasury minister.
Speaker 1: But really what's interesting about questioning the o b R
Speaker 1: at this moment, when we're about to have a budget
Speaker 1: on November the seventeenth again, is that she's kind of
Speaker 1: undermining its credibility by questioning its sums, just as Clarting
Speaker 1: was doing with the BOE. Just as well. Mark Harney,
Speaker 1: the former BOE governor, said that the government was undermining
Speaker 1: the credibility of the UK's economic institutions. Soonac and Jeremy Hunt,
Speaker 1: the new Chancellor, are going to have to rely on
Speaker 1: the o BRES forecasts to get credibility and markets that
Speaker 1: they can balance the books. Are we to think that
Speaker 1: we can believe the o b R sums on growth
Speaker 1: if we can't believe them on Brexit. I was in
Speaker 1: Washington when the day that Liz Trust resigned and there
Speaker 1: was a lot of kind of sympathetic faces around there,
Speaker 1: the people who have been covering the Trump White House
Speaker 1: and the sort of the chaos that we've been seeing
Speaker 1: it totally broken through in America and all around the world,
Speaker 1: and they were saying, are you okay? You know with
Speaker 1: all this gus And there was a bit of a sense,
Speaker 1: wasn't there when Soona was anointed that maybe in for
Speaker 1: a period of calm here, maybe you know, we're back
Speaker 1: to a little bit more of a kind of nor
Speaker 1: Conserva approach and a little bit of the heat taken
Speaker 1: out debate. But what you're saying, is he is that
Speaker 1: you know, it's the same group of MPs, isn't it
Speaker 1: sitting in the Houses of Commons? And maybe sic priorities
Speaker 1: are not that much different to his his maybe his
Speaker 1: two pre assessors, in fact, both both Trust and Boris Johnson. Well,
Speaker 1: everyone's penning their hopes on Richie Sunac. But um, I
Speaker 1: think you have to ask digg dig a little deeper.
Speaker 1: Let's go past his economics. Is he really a brexitter?
Speaker 1: I was wondering, is he just a brexitter? Because yeah,
Speaker 1: well you need to be a brexitor if you wanted
Speaker 1: to rise to the top of the Tory Party, get
Speaker 1: into power and make change in government. But speaking to
Speaker 1: people who say, look, he's an Atlantic sist, he went
Speaker 1: to Stanford, he worked for Goldman. In his heart he
Speaker 1: believes in Brexit. Then think about the Rwanda policy. He's
Speaker 1: reappointed seller Bravernment as Home Secretary and we are to
Speaker 1: understand that he does believe in sending asylum seekers to Rwanda.
Speaker 1: Doesn't go down well with swades of the UK population
Speaker 1: green policy he demoted to climate ministers. He said he
Speaker 1: wasn't going to cop but well we've been on it.
Speaker 1: He said that he will. There we go. But nonetheless,
Speaker 1: I think Alok Sharma is not attending cabinet. Here is
Speaker 1: a question mark over is green credential. I guess we
Speaker 1: know that he is. He is sort of fiscally conservative,
Speaker 1: so that much was clear during the Borough series where
Speaker 1: he had fights with with Boris Johnson about you know,
Speaker 1: paying for stuff. Cakism was not his economic strategy. But
Speaker 1: what we don't really know about him, as you're kind
Speaker 1: of a leading to, is his is his social and
Speaker 1: his cultural vision for the UK. So we we've still
Speaker 1: got to learn who who Rishi is someone described that
Speaker 1: Jill Rutter at the Institute of Government. She said, it's
Speaker 1: not Singapore on Thames that he wants to create. Here
Speaker 1: is California on Thames. It's like, you know, we want
Speaker 1: to bring Silicon venture capital, spirit of entreprene neuralism to Britain.
Speaker 1: That's his that's his kind of vision. Yeah, right, and
Speaker 1: you know in terms of how that spills over to
Speaker 1: the City of London, right, and his relationship with the
Speaker 1: Bank of England as well. What does that mean? I mean,
Speaker 1: I think he's talked about obviously boosting the city and
Speaker 1: I've got the Services Bill, the Financial Services but is
Speaker 1: making its way through. You know. One thing that really
Speaker 1: struck my eye this week was this suggestion, and this
Speaker 1: has been a controversial amendment to that bill, that the
Speaker 1: government can override the city regulators if there's some what
Speaker 1: they would say as emergency reason, but really for any
Speaker 1: reason that they seem deemed necessary. So again to this
Speaker 1: point about attacking the institutions of Britain or the City,
Speaker 1: the financial services, but in front of Parliament at the moment,
Speaker 1: if if the reports are true, is going to chip
Speaker 1: away at the independence of institutions like the f C
Speaker 1: A and presumably the Bank of England as well, and
Speaker 1: that's got to hurt as well in terms of global investors,
Speaker 1: hasn't it. Some words from the Bank thing then said
Speaker 1: that at Mansion House last week that it would undermine
Speaker 1: the credibility if the city internationally, and well, you just
Speaker 1: you need to think about the offering of the city
Speaker 1: under Sounac if you're going to have all these tax
Speaker 1: rises as well, because the UK Finance was warning that
Speaker 1: London might be less competitive than Frankfurt and New York.
Speaker 1: But at the same time he and Jeremy Hunt need
Speaker 1: to balance the books. As they say, there are eyewateringly
Speaker 1: difficult decisions to make. And if you I mean Sam
Speaker 1: whats the head of the Predational Regulation Authority the Thank
Speaker 1: of England, he U if we're going to I mean
Speaker 1: Richie is a pure Brexiteer because he obviously he backed
Speaker 1: he backed in twenty six and he's only just become
Speaker 1: an MP and at that point he was going against
Speaker 1: the government because the government was a remainer government under
Speaker 1: Cameron Um, so you know, he took an ideological position there.
Speaker 1: And now you've got Brexit and what you don't have
Speaker 1: is we have have access to the financial services on
Speaker 1: the in Europe, and so they're not granting us equivalents.
Speaker 1: You can see his thing, King, We we need to
Speaker 1: be Singapore California in terms we need to deregulate, we
Speaker 1: need to take advantage of this. But of course, as
Speaker 1: the regulators point out, you need to have stables, really
Speaker 1: stable financial center. That is a prerequisite of a strong
Speaker 1: a strong city. So there's this balance which he's obviously
Speaker 1: trying to strike, which the regulators think he's planning to
Speaker 1: go too far on, which is a sort of deregulatory
Speaker 1: drive to to boost growth using the city, which was
Speaker 1: kind of what happened in the eighties and the Thatcher
Speaker 1: with the Big Bang. And it's but I mean, you're
Speaker 1: not going to get a new Big Bang when everything
Speaker 1: has already been deregulated. So it's all, yeah, it's a
Speaker 1: it's a really tricky one to see how it's this
Speaker 1: one's going to work out. And they're certainly going to
Speaker 1: go up against the institutions against to your point that
Speaker 1: this fight against our institutions is and over, Yeah, and
Speaker 1: so in that fight just to because back to where
Speaker 1: we started on this, you know, did the institutions managed
Speaker 1: to pull a blinder. We've seen Andrew Bailey ride out
Speaker 1: this storm has gone from the commons disasters, as you said, Lizzie,
Speaker 1: to actually outlasting that Prime Minister. I mean, so do
Speaker 1: you see his um that project continue. You know we're
Speaker 1: going to hear from the we're recording this on on Wednesday.
Speaker 1: By the way, we had the Bank announcing what everyone's
Speaker 1: expected to be another three quarter point rate hike tomorrow.
Speaker 1: Potentially we might be nearing the peak of interest rates.
Speaker 1: Are things looking rosy next year? That is the bank
Speaker 1: going to have an easier ride? I mean, if you
Speaker 1: if you take what's happening in the economy at face value,
Speaker 1: that there is going to be a natural um sort
Speaker 1: of squeezing out of inflation as people as we head
Speaker 1: into what is expected to be at least a shallow recession. Um. So,
Speaker 1: in terms of what the bank has to do, if
Speaker 1: we're already kind of having a having a recession, they
Speaker 1: won't have to raise rates quite as aggressively. UM. But
Speaker 1: I imagine they're going to do a three quarter point
Speaker 1: rate rise now because they're kind of behind everyone this.
Speaker 1: The Bank went first on raising rates and then just
Speaker 1: sort of went at a more. It's gone first on QT. Yeah,
Speaker 1: but we criticized things slow. New Zealand. New Zealand is
Speaker 1: the only other bank doing it. They're they're they're not
Speaker 1: one of the G seven. So the first major the
Speaker 1: banking is the first major one to be doing this
Speaker 1: active selling of guilts, which is which is proper sort
Speaker 1: of intervening again in the in the in the markets,
Speaker 1: which can dislocate things. But in that sense, Bailey's one
Speaker 1: because he's got back to what he wanted to inflation
Speaker 1: fighting and retooling. If there is another crisis, can the
Speaker 1: bank complete its plan for quantitative tightening over the next
Speaker 1: five months. It really wants to start reducing that huge
Speaker 1: bank of guilts that our owns um This latest blow
Speaker 1: up came out of what you said, they should have
Speaker 1: expected it. But from their perspective, coming of nowhere, is
Speaker 1: it going to be able to complete that program and
Speaker 1: kind of complete its ark of the interest rates over
Speaker 1: the over the coming months. Andrew Haws at the Bank
Speaker 1: of England, he's the head of Markets, he's this massive brain.
Speaker 1: He was saying that this l d I blow up
Speaker 1: and the pension fund crisis has obviously it's been sparked
Speaker 1: by right interest rates, and rising interest rates make pension
Speaker 1: funds natural buyers of guilts. So one of the bizarre
Speaker 1: kind of things that may be happening here is the
Speaker 1: rising interstrates are going to make are going to make
Speaker 1: pension funds more purchase more of the government debt that
Speaker 1: is issued. So can they get through this? Can they?
Speaker 1: Can they do the forty billion of active banking and
Speaker 1: do forty billion active sales that they're planning. They're targeting
Speaker 1: it at the at the short end of the market
Speaker 1: where there is appetite and then and you potentially actually
Speaker 1: have these pension funds becoming more attracted to buying buying
Speaker 1: it because of rising interstrates. So they the first one
Speaker 1: got away really well. Then there was three points six
Speaker 1: times cover. Um. You know, if if, if if the
Speaker 1: government doesn't issue masses of debt like you know, as
Speaker 1: was expected on the Quasi and co, then maybe there
Speaker 1: is there is the capacity to absorb it without without
Speaker 1: another blow. And so we're talking about the ultimate blinder,
Speaker 1: are we for the next year? Vainly, vairely the hero
Speaker 1: it saves the UK. Let's see what they do at
Speaker 1: the long end, because that's obviously where the market doing
Speaker 1: well happen. We might hear more about that at the
Speaker 1: Bore Decision tomorrow or today when you're listening to this
Speaker 1: maybe Okay, thank you brilliant, Thank you so much for
Speaker 1: Lizzie Burson into Lordrick. Thanks for listening to this week's
Speaker 1: in the City. We will be back next week, but
Speaker 1: in the meantime, if you like our show, please head
Speaker 1: on over to Apple Podcasts or wherever you listen to
Speaker 1: podcasts and rate, review and subscribe. This episode was hosted
Speaker 1: by me David Merritt. It was produced by Summersadi and
Speaker 1: special thanks to for Lordrick and Lizzie Burden.