So how was Super Thursday for you? Apologies if you don’t know what I’m talking about, or if you thought I was referring to the England cricket team’s outstanding performance on day one of the fourth Ashes Test in Nottingham.
In fact, Super Thursday is the name dreamed up by the Bank of England to describe a new approach to handing out data related to UK interest rates.
The new ‘data dump’
Under the old regime, the Bank’s Monetary Policy Committee would meet every month to decide whether or not to change the base rate. Their decision would be announced on the first Thursday of the month, but the reasoning behind it – and how individual MPC members had voted – wouldn’t be revealed until a couple of weeks later when the meeting’s minutes were published.
The final piece in the jigsaw as far as the Bank’s view on interest rates is concerned is the quarterly inflation report, which sets out its view of the state of the UK economy. Again, this has until now been published separately.
A more coherent picture
Super Thursday was designed to combine these three separate strands into a single outpouring of data and opinion from the Bank (although of course in future, the inflation report will only be included every third month).
The Bank’s governor Mark Carney said he wanted to end the drip-feed of information in the interests of transparency, and so that politicians, analysts, businesses and households get a clearer and possibly more concise picture of what is going to happen to rates.
Interest rates on hold, but for how much longer?
So what did the inaugural Super Thursday have in store? Interest rates were left on hold, as expected, but the big question was: how close is the first rate rise?
Carney recently suggested that it could come around the end of this year, but the MPC minutes released alongside this week’s rate announcement showed that members voted 8-1 in favour of a hold. At least two members had been expected to go against the majority view, so the 8-1 result suggests that a rise may be further off than we had been led to believe.
Carney said there were a number of issues that had to be weighed up when deciding on the timing of the first rise: the economy seems to be recovering well, and wages are also rising. These factors both put some upwards pressure on rates.
The guessing game continues
But on the other hand, a recent increase in unemployment and the current low level of inflation make a hike in the base rate more of a risk.
Another significant factor is the strength of the pound: a rise in interest rates would boost sterling further, making life even more difficult for Britain’s exporters.
In fact, the implication that a rate rise was now less likely in the near future knocked about 0.75% off sterling’s value in the immediate aftermath of the announcement.
Overall, the simultaneous release of information from the Bank will reduce the amount of speculation around interest rates – and that is probably a good thing. But the first Super Thursday did little to shake the view that the timing of the rate rise remains little more than a guessing game at the moment.