Home > The Merk Perspective > Merk Insights > Feb 10, 2010

Merk Commentary: Bank of England - the Yo-Yo Central Bank

Axel Merk
February 10, 2010

With its most recent comments, Bank of England (BOE) Governor Mervyn King cemented the BOE’s status as the yo-yo central bank. Mervyn said, it’s “far too soon” to say whether officials have halted their bond-purchase program.

There’s a saying in England that if you don’t like the weather, just wait a bit. It seems that the British fickle weather has transpired to monetary policy. The weather and British monetary policy indeed have a lot in common: they are both rather unpredictable. Except, of course, that one can rest assured that the BOE is inclined to reverse major decisions in due course.

The yo-yo approach to monetary policy is nothing new in the U.K. Even before the financial crisis, monetary policy would switch more frequently and more aggressively than in other Western countries.

A game of yo-yo ends when the yo-yo no longer has enough inertia to keep winding and unwinding and yet another dose of stimulus eventually derails it. Let’s hope the BOE has mastered its game.

Axel Merk
Merk Investments
President and Chief Investment Officer
Author of SustainableWealth.

This report was prepared by Merk Investments LLC, and reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any investment security, nor provide investment advice.

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