It has been a long time since March 2009 when the bank base rate was cut to 0.5 per cent.
Since then, each time the Bank of England’s monetary policy committee (MPC) has met, we have been inundated with a barrage of press releases.
“No change” press releases have predominated over the past seven years, although it seems peculiar to me so much time should be wasted in writing a “Nothing has Happened Today Shock Horror” piece of marketing material.
Yes, newspapers covered this non-news anyway. What does that say about us? Answers on a postcard...
But last month, ah, that was a different kettle of fish. Mark Carney’s comments on 30 June post-vote to Brexit suggested a rate cut was not just on the cards, but in the very next hand he would deal.
Cue much anticipation in July, with analysts, commentators and journalists alike waiting to see whether it would be a 0.25 percentage point cut or a full 0.5 percentage point cut.
Consensus opinion was wrong in May 2015 during the General Election and it was wrong on 23 June this yearWould we go to zero?
No, was the answer. Again, the vast majority of decision-makers on the MPC chose not to push for a rate cut. The fundamentals, governor Carney told markets, just did not make it necessary.
But now we have another MPC decision, coming after consecutive sets of weaker than expected PMI data. According to Steven Bell, chief economist at BMO, he thinks the UK is in a recession - cue a rate cut.
He comments: “The latest observation for the Composite Markit PMI showed the biggest decline since the global financial crisis of 2008-09 and, based on a regression and some assumptions, points to a 0.4 per cent contraction in GDP in the third quarter of 2016 compared with the previous quarter.”
Ana Thaker, market economist at PhillipCapital UK, believes a rate cut will indeed be on the cards - especially if tomorrow (Wednesday 3) produces poor service data for the UK.
She says this indicates: “Markets are 100 per cent certain there will be a rate cut by the BoE on Thursday and this view will only be reinforced by poor PMI figures. It remains to be seen how much looser monetary policy can stimulate the ‘real economy’ as business expectations diminish in the wake of Brexit.”
A whole 100 per cent. The markets were 99 per cent certain of this in July. Had 40 per cent of the MPC voted to cut last month, I’d be more convinced. But I’ve not yet seen Mr Carney make any rash decisions.
Plus consensus opinion was wrong in May 2015 during the General Election and it was wrong on 23 June this year. I’ve learned to be sceptical of consensus opinions, and to leave important decisions firmly in the hands of people who are wiser and more experienced than I am.
In fact, this is something Michael Hewson, chief market analyst at CMC Markets, has said. He comments: “Act in haste, repent at leisure – these are words the MPC would do well to consider this week when they are widely expected to meet and move on interest rates for the first time in 87 months.
“That the market is pricing this in as a 100 per cent certainty is largely as a result of the expectations that have been built up in the aftermath of June’s historic Brexit vote.
“In essence the central bank has boxed itself into a corner, and despite recent data should really be asking itself whether it would be wise to act at all this week.”
Whether there will be a stay of execution once again or whether the UK market really does need the stimulus of a rate cut is out of my hands and, thankfully, out of the hands of market commentators.
You might be 100 per cent certain it will happen, but unless you’re pressing the big red button marked ‘drop’, I’m going to treat every press release I get from now until 12 noon on Thursday with a healthy dose of doubtfulness.