Market hearsay rules supreme

It’s funny how, on one day, hard data show that UK inflation has fallen to its lowest level since September 2004, and this is reflected in the further weakening of our now noddy currency against the euro. The next morning we see a huge jump in the value of sterling – by nearly two eurocents – which one might be tempted to correlate with reports that the growth in British unemployment is slowing marginally.

Of course, the old adage “correlation doth not causation imply” applies here as everywhere. The real reason for today’s strengthening of sterling is that some anonymous policy wonk in the Bank of England has been putting it about that the bank’s so-called ‘quantitative easing’ is working. There is nothing to back up this statement of economic faith, but the result is clear: the markets have rallied, and it’s lunchtime trebles all round in the City of London!

Invisible hand, my arse!


No longer anonymous, according to the FT, the policy wonk referred to above is Paul Fisher. It’s still bullshit, however. National Australia Bank economist Gavin Friend says that “Today it appears that the Bank is letting it be known in more forceful terms that it is not talking the pound down.”. That’s a long-winded way of saying that the Bank of England is talking up the currency.