Phew. Or should that be ouch The Bank of England’s Monetary Policy Committee voted to keep rates at historic lows of 0.1 percent.

The financial markets are getting a kick in the face for Andrew Bailey, governor of the Bank of England, believing that a hike was coming.

You are absolutely right. After years of Mark Carney’s unreliable boyfriend and unreliable guidance, one hoped Bailey would be more loyal husband.

Rates ruling: Bank of England governor Andrew Bailey (pictured) is getting whacked around the head by the financial markets for allowing them to believe that a hike was on its way

Rates ruling: Andrew Bailey, Bank of England governor (pictured), is being whipped around the head by financial markets because he allowed them to believe that a rate hike was on the horizon

Instead, he’s more like the Grand Old Duke Of York, who, according to one economist, “happily marched the markets up the hill to anticipate a rate rise only to have them march them back down again.”

The markets don’t like surprises. That is why sterling and gilts went into a spin following the 7-2 vote of the nine members to keep interest rates the same. The FTSE indices, however, jumped on the news and were relieved that higher rates wouldn’t be reducing consumer demand.

The Bank’s role should not be one of guesswork when setting interest rates. The Bank should lead with clarity – and credibility – and any moves should be positive ones which reinforce monetary policy and the direction of travel.

However, the markets have been expecting a rise in the last few weeks thanks to Bailey and Huw Pill, chief economist.

While most of the City’s economists disagreed with their view – that higher interest rates might be necessary to dampen inflation – the markets had their antennae tuned in more closely to the central bankers.

Bailey and Pill knew they had created confusion with the lively commentary they generated with their hints.

The question is: Why didn’t either of them try to change market narratives and push the markets back to where it was?

You might wonder if they wanted to create confusion which, as you saw, caused lenders to raise mortgage rates. 

What they have done instead is to ensure that investors and analysts – whose livelihood depends on their ability to make huge investment decisions based on future yield curves, many of them on our behalf – will distrust the central bank even more than they already do.

It is not clear why Bailey didn’t change his stance. It is particularly strange that Bailey did not vote for a rate increase.

Hmmm… Could it be that he changed his mind? Or was he misunderstanding the tone of his earlier messages?

Or because he didn’t want to be a minority when it comes to voting? It turned out that the two hawks were Dave Ramsden (who voted against QE) and Michael Saunders (who also voted for it). Dr Catherine Mann was also one of the hawks.

We know that rates are likely to tighten next year. Bailey needs to get his act together immediately and plan the Bank’s communications strategy.

The next few months will be difficult due to rising living costs and increased supply chain disruptions. We need a Steady Eddie and not a Grand Old Dude.

Season of good tidings

Sainsbury’s has some promising news, with a rebound from last year’s losses to a decent loss for the 28 weeks up to September. 

Simon Roberts, chief executive officer, is even more optimistic and says that customers are returning to pre-lockdown behaviors.

There’s a double bonus. Sainsbury’s market share for online sales is also growing. Roberts also stated that trading is improving ahead of Christmas despite fears about supply chain disruptions and labour shortages.

There are still massive shortages – and supply scale disruptions – but the chain’s logistics network is strong enough to cope.

Boxing Day has been granted to staff as a thank you for a difficult year. It’s a nice touch and all shops will be closed. You don’t have to be panicky about buying.

Go Bond

According to the Society of Motor Manufacturers and Traders, UK car sales fell by a quarter compared to last year’s same month to 106,000.

This is hardly a surprise; people are travelling less because of the pandemic while deciding which car to buy – petrol, diesel or EV – has left many consumers either catching the bus or dazed and confused.

Yet loss-making Aston Martin bucked the trend, doubling the sales of its DBX sports utility vehicle aimed at rich lady customers at £160,000 a pop. 

Money doesn’t buy taste, they say. Any real driver will tell anyone that there is only one Aston Martin you should own, and that’s Bond’s DB5.

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