As the Guardian notes this morning:
Britain's retailers are suffering the sharpest drop in spending since the depths of the coronavirus pandemic as hard-pressed consumers tighten their belts as a result of soaring inflation.
The monthly health check from the British Retail Consortium (BRC) reported a third successive drop in activity as the cost of living crisis continued to bite.
But still, no doubt, the sadists at the Bank of England will be slathering over more interest rate rises this month, seeking to create further distress in an economy already suffering too much.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Do you think that the real motivation might be to try and prop up the FX rate of sterling against other currencies rather than to dampen down inflation given that the BoE already knows putting up interest rates won’t address the actual causes of current inflation rates?
I doubt it
That is nowhere near their brief
I think support for the FX rate is certainly in the calculation. They would argue that a depreciating pound boosts inflation and, to a degree, they would be right….. the question is, what collateral damage will be done while protecting the FX rate?
I think the current situation reveals all to clearly that an “independent” Central Bank is a problem – what is needed is a coordinated approach. If the BoE truly care about inflation reduction and ONLY inflation reduction then what else can they do except raise rates? I suspect that, in private, they might admit that other (fiscal) solutions would be better but that is beyond their remit. The key is to get the policy mix right and that requires coordination.
For example, IF (and I am not saying they should) the BoE really thought higher rates were needed to protect the pound and control asset prices then this might make sense IF offset with taxes on investment income, wealth and possibly cuts in taxes on labour and VAT in some areas.
I am probably wasting my breath in the current political environment but the essential re-balancing of policy requires a single overarching strategy from Government… not piecemeal subcontracting to other bodies.
Agreed
But I remain unconvinced on FX
We all know reversing Brexit solves that – and nothing else will
Reverse Brexit and co-ordinated policy; in Conservative Britain? With candidates for PM so bad Johnson remained in power, unfit for office – because all of them, including the Cabinet thought the rest were even worse. Candidates who blether about tax cuts in a cost-of-living crisis, an unfinished pglobal pnademic, a war in Europe and unfinishable Brexit that is wrecking the economy.
That’ll work.
There are more problems on the way (but I doubt that the BoE has either the wit or wisdom to see them). Wholesale electricity prices from circa Oct 2021 to circa June 2022 wobbled between £150 and £250/MWh. I’m sorry to inform readers that a “new normal” of circa £200 to £350/MWh has now emerged. This is “the market” factoring in Russian gas shutoff.
Thus what the BoE is doing could be considered an amplifier in the same way as the Tory-imbecile Howe cranked interest rates in 1980 to tackle inflation caused by ……….energy price rises – sound familiar? – did not work well last time – ain’t going to this time. But hey, that’s the tories.
My guestimate is that mid-2021 vs mid-2022 wholesale elec will have increased by around 10x. Does not need to be that way – renewables are coming in at £37 – £45/MWh i.e. a 10th of current wholesale prices. The only person that was talking of market reform – was oddly Johnson. My contacts recently had a meeting with BEIS, who denied point blank that market reform was on the table. So you can see that on the one hand the BoE wants to lay-in with the interest rate riding crop & on the other BEIS is happy to pull up the towel/bowl of water & soap………. “nothing to do with us guv” etc. What a country.
Thanks
People generating at £35 and selling at £350 will be making a killing. Quick, let’s build some more.
Sadly that is not the way it works. Contracts for Difference means that the difference between auction strike price of £37 and wholesale price of say £350 goes to………UK government. They could use the money to alleiviate energy poverty but I rather think they won’t bother.
I agree
Sorry, I’m not following. Can you explain that to me?
So the producers are being paid £37?
Who is paying £350, and who is it being paid to? Who gets the windfall?
I think the aim of the BoE is to cause distress because its the best way to change things for your mates/vested interests when everyone is in disarray and panic.
The ‘vulture culture’ of the City is dominant in the BoE too.
PSR,
From your previous comments, I understand that you you work in the housing department of a local authority.
If that is correct, does anyone talk of solar panels and natural insulation (not the carcinogenic fibreglass insulation) or buying up perfectly stable old buildings and getting local colleges involved in renovation?
Yes Ralph and all the time Ralph, all the time.
My org’ has been fitting PV since Adam was a lad and we now have in-roof PV provided. With Council budgets slashed since 2010 there are lots of ex-departmental buildings hanging around that we’ve either had to demolish for houses or convert into flats. Since 2019 all our new designs have been low carbon to get through the new building regulations including EV charging. We will be using air source heat pumps for example. Prior to that every property we have built has been air-tested to reduces droughts etc.
To get the best results, you have to model the right mixture of low carbon kit for the properties from a range of options so we always go with the lowest cost to tenants and average cost for maintenance – it’s a bit of a balancing act.
The problem is that we can’t do this work fast enough so now we’ve got outside contractors involved too. And we’ve had staff retiring from work or leaving for the private sector which does not help.
We’ve always fitted plenty of insulation but I’m not sure which and mostly it is underneath floors and in between walls.
Thanks for the reply PSR.
There is so much potential out there, but bickering by councillors (reading minutes) holds everything back.
We really are going backwards.
As retail sales decline, I see that there is still no plan for decaying Town and City Centres.
Perfectly sound empty buildings further add to the overall gloom.
No plans to tackle high rents and unfair business rates.
One thing that surprises m is that local newspapers/websites constantly complain about the state of their local areas, but I have not seen a good investigative piece about the reasons why.
I don’t understand why there is no desire to start local and progress upwards.
https://northeastbylines.co.uk/north-east-child-poverty-now-highest-in-the-uk/
Local website I was reading while Ben Houchen was on Channel 4 News talking about levelling up the North East.
Ben Houchen is the Tees Valley mayor, responsible for child poverty in most of those councils, and he thinks the best thing to do is have a freeport. Makes me despair.
Agreed
I have worked with the Citizens Advice Bureau and care providers, I would recommend to any journalists and social academics to spend a month working with each.
Very interesting and varied work.
Sorry, don’t agree with any of that.
Firstly, I literally don’t think fuel prices can be too high. Higher fuel prices result in better air quality, fewer dead children & reduced global carbon effects. WHAT IS THE DOWNSIDE?
I also, however, don’t think Rishi, or anyone else, can do much even if they wanted to. The first cause of high oil & gas prices is the war in Ukraine. The second cause of high oil & gas prices is that, for the last 3 months, the pound has gone down like a one-legged man doing the Hokey Kokey. The £ is at historic weak levels against the $ because of inflation, because the BoE has been slow to push up interest rates (yes, I know Richard says we shouldn’t but I tend to follow Gideon Rachman & Martin Wolf), but also because Boris said, ‘we’re going to tear up the treaty. We aren’t bound by international laws’. Bro, how do you think that sounds to overseas investors? We obey the law some of the time until it becomes inconvenient. Pretty soon £s are going to be the kind of stuff you carry round in a wheelbarrow
So you seek to create a world where people die because the fuel to cook and heat is beyond their means
Please go and play with the fascists
WHAT IS THE DOWNSIDE?
Are you real? Large numbers of avoidble deaths from malnutrition and cold sounds a bit like a downside to me.
Callous indifference is not an impediment to posting an opinion on a blog – as was clear in this case