29 November 2017

Annual Dinner 2017

Speaker: Mr Klaas Knot, President, De Nederlandsche Bank

Venue: Institute of Directors, 116 Pall Mall, London, SW1Y 5ED

Members attending this year’s annual dinner at the Institute of Directors in London were treated to policymaker speakers, heart-warming news about rising membership and of exciting changes at the Society coming in the new year.

SBE Chairman Kevin Daly, in his first full year at the helm, delivered some welcome news about the Society’s membership, albeit not about the UK economy. Kevin explained that while the UK has slipped from top of the G7 growth table a year ago to bottom of the club post-Brexit referendum, the SBE’s membership has closed in on its record highs.

Kevin described 2017 as a “bittersweet year for the UK economy.” He said that “viewed in isolation, the UK’s economic performance has not been great but it has not been terrible either – growth has been subdued and inflation high, but unemployment has fallen to its lowest level in more than forty years.”

But then came the rub. “Viewed relative to the performance of others, the UK economy has been very disappointing. While growth has been humdrum here, it has accelerated sharply in the majority of countries across the world and, especially, in the UK’s largest trading partners in continental Europe. In the process, the UK has fallen from the top of the G7 growth league to the very bottom.”

More happily, the SBE’s membership is hitting record highs, while the Society which is mulling a name change to the Society of Professional Economists (SPE) if this year’s AGM approves it, is preparing to launch a professional development programme for economists, to be run by the Society’s new Head of Professional Development, Andy Ross, from January 2018.

The SPE rebrand would take effect early in 2018 and would come in what will be the 65th year of the Society.

The winner of this year’s Rybczynski Prize was also announced at the dinner, and this year it involved some team work. Congratulations to co-authors Mirko Licchetta and Michal Stelmach from the Office for Budget Responsibility, for winning the £3,000 prize. The essay competition is now in its 17th year, and is in memory of the late Tadeusz Rybczynski, an eminent economist and long-serving former Chairman of the Society.

SBE members can read the winning essay “Health spending: it’s not just about ageing” in the Reading Room of our website.

The SBE’s President Sir Dave Ramsden then briefed members about the Bank of England’s Education Initiative, before we heard from our guest speaker for the dinner, Klaas Knot, European Central Bank member and President of De Nederlandsche Bank, who offered considerable insights into the winding down of the debt-buying spree of the ECB’s Asset Purchasing Programme (APP).

If the ethos of the eurozone currency bloc has been mostly about convergence, it was exciting to discover that Mr Knot’s keynote speech was closely in harmony with his off-the-record Questions And Answers session in terms of being engaging and interesting to the discerning audience of around 140 SBE economist members present.

Mr Knot prefaced his speech about monetary policy by declaring that we stand at an important turning point, 10 years after the global financial crisis began to unfold.

He said that the current inflation outlook poses no threat to price stability and that a rather slow uptick in inflation – at 1.5% in November and 50 basis points below the policy ceiling of 2% - was due to global supply factors largely outside the realm of central banking.

But Mr Knott also emphasised that prolonged liquidity stimulus, especially while the Phillips Curve relationship between demand and inflation attempts to reassert itself, was likely to make policy procyclical and ramp up risks for the economy, such as potentially misallocate credit and fuel the propping up under-productive so-called “zombie” firms.

“(In the) absence of deflation risk, a full phasing-out of net asset purchases from September 2018 onwards is warranted. Our communication will have to shift accordingly, from net asset purchases and incremental stimulus towards reinvestment and preservation of broadly accommodative financing conditions,” he said.

The APP was recently extended by the ECB until at least September 2018, albeit at a halved pace of 30 billion euros per month.

“With real GDP growth hitting levels above 2% year-on-year, the monetary policy stance is increasingly out of sync with the business cycle,” he argued as he described the euro zone as experiencing a “strong cyclical upswing”.

One highlight of this year’s dinner structure was that speakers were invited to speak earlier, during serving of the dinner, to allow members more time to network afterwards. This they did.

Report by: George Matlock, SBE Social Media Manager