In a word: dovish. The Bank is robustly sticking to its projections of a quite steep fall in inflation after the predictable spike to April. This chart is key:
Ed Conway has a long summary of the post report press briefing. A choice paragraph to end it with:
Co-operating with the Conservatives Finally, he was asked a couple of times about comments from the Conservatives that they would “co-operate with the Bank” when it came to their fiscal plans. In remarks which might be taken as a slap-down at the Tories for comments which apparently undermine the Bank’s independence, he said a couple of times: “I don’t know what this proposal means… You’ll have to ask them.”
But what confuses me more is this:
The special liquidity scheme “We have absolutely no intention of extending it. It is the most generous scheme in the world. It’s more than enough. We are working with the FSA and individual banks to ensure they have schedules for refunding this money.
Another key feature of the report is the continuing concerns about credit and liquidity going forward. For example, on p16:
Overall, funding remains a significant concern for many lenders. In the November 2009 Systemic Risk Survey, around a third of market participants reported that funding and liquidity problems were a key risk to the UK financial system, and that such problems were among the most challenging to manage.
In which case why announce a policy that is less supportive of liquidity? As the FT’s blog points out, credit conditions are getting tighter for ordinary households, leading Emma Saunders to worry aloud about “the effectiveness of central bank monetary policy in a context of widening spreads”.
I am a third through it: the rest after a 16k erg. You can read it here.