Thursday, 8 August 2013

Inflated emphasis in the news

From the BBC: "The Bank of England has outlined its strategy for future interest rate changes - and it is likely to mean further pain for savers, but continued cheap mortgage rates."

But in the self selected set of economics blogs that I read, yesterday's Inflation Report represented a tightening of monetary policy. The BoE is "targeting high unemployment", and using a poorly designed system (the specified "knockouts" would have suggested that the BoE tighten policy in the middle of 2008 - this makes them almost self-evidently wrong-headed indicators). And given that the market fell and the pound rose on the news, it's likely that these views represent something like the consensus view in financial markets.

So given that creditors tend to benefit from tighter monetary policy and borrowers from looser monetary policy, and yesterday represented a tightening of monetary policy, why has much of the media focused on complaints from greeting-faced savers groups?

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