It’s official: central banks have become monuments to utter confusion.
Last week the ECB tightened monetary policy while handing over millions to the banks to keep the eurozone from tumbling again into a sovereign debt crisis. I wrote what I thought about that at the time.
This week the new member of the Honour of Profound Inconsistency goes to the Bank of England, who just tightened while relaxing mortgage rules;. The concern that drove this is that the (structurally overheated) UK housing market may hit a bumper in the road: the housing market has been slowing down for a few months (i.e. prices are rising at a slower pace). Since not much else is left to lift growth rates in the country – Brexit, Covid, permanent government incompetence and uncertainty over economic policy, long-term productivity issues, … the list is long – the Bank clearly thought that borrowers, and therefore banks, needed a shot in the arm.
The outcome: poorer borrowers will pay the price in unaffordable mortgages, repossessions and possibly bankruptcy (with financial drama later in life). The banks, on the other hand, …
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