[NYTr] Bank of England Squelches Speech to Help Hide Instability

[All the News That Doesn't Fit]

The Telegraph - Aug 17, 2007
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/18/cnboe118.xml

Bank of England suppresses speech on financial system's (in)stability

Bank Pulls Speech to Quell Instability

By Edmund Conway

The Bank of England has taken the unusual step of withholding a
speech by a key executive for fear of adding to market insecurity.

It had been planning to release a speech by its financial stability
chief, Nigel Jenkinson, to fellow central bankers on Monday, but
has pulled its publication at the last minute.

The revelation is the latest evidence of the Bank's pointed decision
to maintain silence in the face of the market instability.

It came as a slew of economists cut their interest rate forecasts
and predicted that the Bank's Monetary Policy Committee will not
raise borrowing costs again.

Mr Jenkinson's speech at the Reserve Bank of Australia Conference
in Sydney is entitled "The Financial System: Structure and Resilience."
The bank said he will still make the speech but it will not be
released publicly.

Mr Jenkinson's last major speech some months ago warned about "the
vulnerability of the financial system to a sharp change in conditions,"
and cautioned lenders about their appetite for risk.

With the tone in the market having swung dramatically from optimism
to pessimism in recent weeks, the bank judged that there was a risk
the forthcoming speech would stir up the markets unduly.

Whereas the European Central Bank and the Federal Reserve have both
pumped billions of euros and dollars into their markets to prevent
any banks from suffering unduly, the Bank of England has done nothing
other than point borrowers toward its emergency credit facility,
which charges a penal rate of interest. The bank fears that too
much of this kind of action can panic the markets.

With the nervousness persisting for another week, speculation is
growing that the bank will shelve its apparent plans to lift interest
rates again to 6 percent.

Michael Saunders, chief UK economist at Citigroup, said: "The outlook
has changed. Our prior view that the MPC will hike to 6 percent has
been overtaken by financial market turmoil and soft data (especially
the CPI). We now expect that 5.75 percent is the peak, with an
extended rate plateau."

Malcolm Barr, UK economist at JP Morgan, said: "The tightening in
credit conditions and the Fed's response to it is enough to suggest
a move up to 6 percent no longer looks likely this year."