Bank of England plays the uncertainty card with confidence

26Nov04

Given the comments here about the general press complacency toward the future interest rate environment, comments reported today from the Bank of England’s chief economist Charles Bean offer further pause for thought. There is more than a faint echo of Greenspan’s warning last weekend, and the BBC’s Evan Davies woke us this morning reporting on the subject.

The story, if there was one, was not whether house prices would drop and by how much, or what would be the impact on consumer spending, and where would interest rates go. The key phrase, from this vantage point, was the emphasis on “considerable uncertainty.” I take this as a sign of a very worried Bank of England.

The dance of pundits, which allows no one to sit it out, is clearly arranging itself to show fairly uniform expectation of trouble ahead in UK housing. Between the lines now this “great uncertainty” indicates a general knowledge that things have turned, and are moving quickly. Thus everyone must get their ducks in a row to reflect the emerging reality.

Many who might have tried to predict a turn, in the way Capital Economics boss Roger Bootle did over a year ago, prefer to hug the neutral consensus rather than be proved wrong consecutively on timing. They know the risk has gone now, and are prepared to tell us what will happen in the future, because it has already started to happen.