The Bank of England has left base rates at 4.5% today.
Whilst I maintain my view the interest rates in the UK are far too high because, with an inflation rate that is under 3%, an interest rate of this level cannot be justified without significant inequality arising within society, which will be the basis for considerable social tension in due course, the decision that the Bank has made on this occasion is unsurprising, given the framework within which they operate.
The Bank has been told to manage inflation risk without consideration of the consequences. That is what it is doing. Trump's actions are threatening to increase inflation rates. That's a fact. The Bank is doing what it is told. They will, as a result, make the situation that the threat from Trump is creating very much worse, but given the framework they have been given, that is what they think they should do.
The trouble is, there is no one to stand back and tell them to do anything else.
Reeves will not challenge them because they could blow her cover about her career whenever they wished, and she will not risk that.
Labour appears to have no macroeconomists in its numbers at all. Come to that, thinkers are few and far between in their ranks. So, the chance that anyone might ask the obvious question, which is whether the interest rate setting system is wrong for this moment in history, will not occur to any of them. Neoliberalism says we must have independent central banks that must operate as the Bank of England is doing, so that is what must happen, they will say. How could they possibly challenge the economic hegemony, they would suggest?
And so, we will sink into ruin. All because almost no one in Labour, or politics as a whole, has a brain cell left with which they might ask the critical questions of the day.
That's what neoliberalism has done for us: it has destroyed the capacity of politicians to think.
Right now, we need both a central bank and a base rate that are managed for the benefit of the country as a whole. The country needs reduced rates. We are not getting them. Blame our supine and, frankly, stupid politicians for that.
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The rigidity here is really frustrating.
The lack of knowledge in MPs already claiming to be managers of state services is shocking and unforgivable.
It’s as if they want the position, but none of the accountability or responsibility to go with it.
Not bad work for just under £100K a year and upwards is it?
Avatars for wealth – the lot of them.
The problem Richard is what I alluded to in my post under a different article: most Labour MPs have almost zero idea about economics and political economy.
Far too many of them are well-meaning but weak and with little knowledge or experience outside of their own particular area of interest.
Your idea about a training course looks increasingly prescient.
I am working on it
For me, it is as though, without doubt, they are fking the economy. Trump certainly is!
What I’m really concerned with , as a small builder/ renovation tradesmen. Is the social media sites where tradesmen are becoming desperate. There has been a huge downturn in employment in the building sector on the south coast.
( Portsmouth) . Personally I’ve never known this and it’s so concerning how this is playing out. .
I completely understand people being frugal but this is going to be different! ,
Unashamedly it’s like we are being herded into pens. That I’m not happy with!
How bad is this trend? Where is the evidence? I am interested.
In what way according to the BoE, does keeping a real BoE base interest rate of at least 1.5% domestically, control the external inflationary pressures caused by war, weather and tariffs?
Do they explain that?
It suppresses demand
That’s it
Do we really think she from accounts and he the shapeshifter AREN’T behind this?
Reading “The Deficit Myth”, the neoclassical reason for adjusting the base rate is to maintain a certain level of unemployment to “dampen” demand and thus control inflation. I struggle to see how this squares with the Government’s desire to get the disabled into employment.
It is irreconcilable
Conventional economics requires a real interest rate of 1-1.5% – why do you deny that?
What analysis have you done that suggests the long-term real rate should be much lower?
There is not a shred of evidence to support that
Real rates approximate to zero over time
Very pilitely, your claim is as fictional as your name anmd email address.