I posted these on Twitter in reaction to the Bank of England's rate rise:
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The statement is they will raise interest rates to a level to get inflation to 2%. If the cut interest rates as you suggest then they wouldn’t be making that forecast.
Wrong
It is going to happen anyway as their own data shows and fur readings I gave explained on this blog
Quite frankly Mark, do you actually believe a forecast by the Bank of England for more than about a month ahead? (and if you do, can I get some of whatever you’re taking, please?)
Have they explained how the UK ramping up interest rates will stop the conflict in Ukraine, or mitigate supply-side shortages? Or indeed reduce the cost of oil and gas? (Apart, that is, from the secondary effect of stopping the pound falling – keeping the pound higher makes dollar-priced oil and gas and other imports less expensive, but also makes UK exports more expensive.)
More expensive energy, and more expensive food, and more expensive mortgages and rents, and impending across the board tax increases, and pay restraint, is going to lead to unprecedented reductions in standards of living. The government must be hoping something turns up, because this looks terrible, even if they are meeting the market’s expectations. People without money are cold, hungry, homeless, in debt, and do not buy other things.
Spot on
Added to which, the pound opened at $1.14 and closed at $1.12 today. So, notwithstanding the increase in interest rates, the market has responded negatively to the doom-laden pronouncement of the Bank of England today. A job well done?
No!
To say that I am spitting blood about this is an understatement.
We talk about the 1983 Labour manifesto as the ‘longest suicide note in history’.
But this! This really should be the end of Bailey’s tenure for sure.
I do hope that people are reading and learning.
And if Labour are not, then we have to tell them what we expect.
It’s like there needs to be a new level of civil society where voters – whether Left or progressive – need to mobilise as voters and make it clear to any opposition party who will listen that they would not vote for this again. Nor will we stand back and let the utility companies carry on without a windfall tax.
It’s got to stop.
Let’s be clear – Truss really screwed things up and that means that her party, her ministers and certain civil servants are all culpable. Her replacement thinks it’s OK to make us pay for it and the Tories have just managed I think to shoe-horn in their long-held desire to roll back the state through a crisis they are responsible. ‘Never let a good crisis go to waste’ as the Neo-libs say all of the time.
Well, it’s not OK – not at all. We’ve got to get that message over collectively and speak in one voice about this somehow.
Just for a change I watched ITV news. Robert Peston was asked why they were doing this to us.
His answer was, basically, that the markets needed to be re-assured that the government was able to run the economy. One might add “as they think fit”.
I had a “Pilgrim Slight Return moment”-bloody angry. We can only have policies that meet the approval of a few rich people? We are a democracy. I can see a lot of protest and things getting really ugly.
Andrew Bailey made me feel nauseous on Channel 4 News
In fairness, I think he did the same to Cathy Newman
I watched that interview too.
Bailey looked bored with it all and was just wanting to go to his next dinner date with Foix gras and caviar. He looked like a man who knew which side of his bread was buttered for sure. The insouciance was rampant.
I wonder how many of the people he is looking after are Russian.
Is it that BoE represents only ‘city interests’?
Wealthy interests
A query.
If interest rate rise is supposed to prop up the pound, why did it fall when the interest rate increase was announced?
The markets expected the rate to rise more. eventually
The Bank says it will now stop short of 5%, so rates fell
All very silly games at no gain to society
There are two wars being waged. First the domestic class war. There is no economic reason for interest rate hikes other than to try to curtail inflation by increasing unemployment and poverty in order to reduce effective demand in the economy which will make most people poorer, put the skids on the economy thereby creating a recession which will amplify this mistake even further. The way out of supply side inflation is to invest in supply! Invest in the economy using the public sector to drive the economy to recovery by increasing demand for labour, materials and the tools and other means of production. Why don’t they do this? Is it they don’t know or do know but choose not to? Why? Whatever the reason let everyone including our media once and for all recognise the Tories are not able to manage the economy!
The other war is foreign, doing the begging of USA in waging economic war against Russia with the boomerang effect crushing our already COVID battered economy and making supply chains even tighter. The Tories can’t be trusted either to look after our peace and security either!
Dear Richard.
I am one of the plebs at the bottom of the hierarchy who didn’t understand how the government operates (my bad, was busy trying to cope domestically & only watched BBC news, don’t buy newspapers) but thanks to reading your tweets & blogs (some others too) I now know what is happening, thank you for explaining it in terms I can comprehend. My question is, why? What is the end game of the tories, the BoE & the super rich? Other than getting richer obviously! When all us plebs are dead or dying what will the rich have that they don’t have already?
That end game is to be rich without their riches being threatened.
The right of democratic governments to impose taxes threatens them, so they oppose democracy
That’s it
I had to joke to the TV last night when I heard that the BoE was forecasting a 2 year recession – they know, it’s guaranteed because of their policies. Then, just now, I read that that much trumped Northern Powerhouse Rail may be cut back (because there’s no money) and Sizewell C may be delayed or even axed (because there’s no money). I admit I thought Sizewell C a bad buy though I am in favour of fission power but I guess ‘renewables’ will find there’s no money either.
They know what they are doing, this is disaster capitalism rampant, now on plan.
It seems like it
Sizewell would please me
I knew it would, and I agree for this reactor which costs too much and would be controlled by EDF & China. However, fission power has many positives and solar some difficult issues not yet addressed. I did write about this 10 years ago on a website now gone; I should resurrect. I want maximum diversity of energy sources that do not burn fossil fuels till we have enough experience over decades of how things go.
Richard your last graph showing BoE project inflation rates to ease by mid next year, I assume that takes into account their recent hike in interest rates as well as any further increases in future. What would the graph look like without such interest rises is the question.
Re the hike I have seen some argue that the UK is pressured to increase interest rates by the Fed and ECB raising their interest rates. I thought as a fiat currency issuer interest rates are or at least could determined solely by our government as a political choice. Is this not so?
The chart would be identical without interest rate rises
In general these are thought to take up to two years to take effect so there can be little link between them and the falls much sooner