8 February 2023 - Cabinet reshuffle planned to invigorate economy

The actions of the Bank of England over the past years or so have been occasionally difficult to understand. The presence of three independent voices on the Monetary Policy Committee means that there are times when policy is driven by a theoretical view of monetary policy which differs from the practicality of dealing with the bank’s mandate to provide a platform for price stability and economic growth. This has led to Andrew Bailey delivering what have been termed dovish hikes, being almost apologetic for having to tighten monetary policy. The presence of Catherine Mann, Silvana Tenreyro, and Swati Dhingra bring the air of an intellectual discussion to committee meetings, which lessens their impact. The Comments from Catherine Mann this week added a significantly hawkish voice to the MPC process and being only one of nine voices, her opinions are often far more influential than is actually the case. The six Bank of England officials who sit on the Committee have both executive responsibility for their roles at the Bank and the task of creating an environment for stability. For example, Bailey and Sir Jon Cunliffe had to calm markets following the potentially disastrous mini budget that followed Liz Truss’ election as Conservative Party leader and Prime Minister. Looking ahead and past the theoretical views of the independent members of the MPC, it is likely that the Banks will continue to tweak monetary policy at the next two or three meetings rather than decisively creating an environment where inflation is driven lower by interest rates that are actively dampening demand. Beyond Currency Market Commentary: Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.