Alex Wickham, who is usually a reliable source of economic data and who is based at Bloomberg, has suggested that information he has received indicates that UK domestic energy prices will increase by at least 25% by early in the New Year. As a consequence, it is highly likely that UK inflation will increase to more than 4% sometime during 2027, and it is this issue that is, apparently, weighing on the minds of the Bank of England Monetary Policy Committee when they consider changes to the Bank of England base rate, which will be announced after their deliberations conclude on Thursday.
My fear is that they will, as a consequence, raise base rates when this is just about the worst possible course of action that they could undertake for the well-being of the UK, its economy, and all the people who live within it.
I explained why I thought this a form of class warfare in a blog post I wrote last week, and there will be videos to come around money, inflation, and interest rates on Thursday and Friday this week, sandwiching the Bank's decision in the process.
The context is, however, clear. As most people would agree, we are living in very difficult times, and for a majority of people in the UK there is already a cost of living crisis that is causing stress in many households, varying from underlying nagging fear as to the sustainability of current lifestyles, through to outright panic as to how bills will be met when the apparent means to do so just do not exist. Making this situation worse by increasing interest rates so that mortgage and rent costs rise, as will the cost of so many products in which interest costs are effectively embedded, makes no sense at all.
I noted reports yesterday from a senior economist who was previously head of the economics department at the OECD, who said that the time had come for the pretence that there is a division between the actions of the Bank of England and the government to end. He is right. It is ludicrous that we have a situation where the government wants to deliver increased employment, rising living standards and an increased sense of economic certainty when, at the same time, the Bank of England is doing everything that it can to produce the exact opposite economic outcomes, which is precisely what their policies are meant to achieve by choice, and not by coincidence. Their callousness knows no limits, it seems to me.
The question to ask now is when will this economic farce come to an end, and when will it be that we might have people in politics, the Treasury, and the Bank of England who understand the economy, money, taxation and what is required to make them work together to achieve the desired results within the UK economy that people want, which are economic security and, most of all, freedom from fear, which at present the Bank of England is doing everything to create?
I am writing my new book to answer that question. About a quarter is now in draft.
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“ncreasing interest rates so that mortgage and rent costs rise,”… as well as the cost of building renewables, which sits at the core of what passes for UK gov policy. Most RES is built with a mix of debt/equity, usually with a 80/20 ratio. Increase the cost of debt, you auto increase the cost of elec from RES. Central banks be they BoE or ECB understand this, but don’t care. Thus time to replace those in these central banks with those that do. Time to align interest rate policy with e.g. energy policy.
Agreed
Might a root problem be the inordinate, and selfish, power over the county’s governance and governing bodies of the finance group which seems to/does dominate our poliarchic democracy/“democracy”?
not ‘might’, Steve. I would say it is certain
Deeply worrying for all the consequences that will flow from the direct inflation impact and the BoEs one dimensional response to it. We can expect people to get really squeezed again and therefore a ramping up of the blaming of the usual scapegoats.
Because it will be all the Right’s fault, flowing from the predictable indulgence and bungling of their chief acolyte Trump in Iran, and they just will not own it. but what they will and do own is the information outlets that will divert attention from their culpability.
It could get very ugly indeed.
It
will
get very ugly indeed.
The focus on care economics is timely. One dimension worth exploring is how institutional forecasts systematically underweight the contribution of care work to GDP growth. When you compare IMF and OECD forecasts against outcomes for countries that invested in social infrastructure, the forecast errors are telling.
Thank you
So, I have already managed to stump up £180 rent increase this year – will the avaricious bas**rds be doing the same next year to me. I bet they will.
In the last few weeks I have come to the conclusion that neo-liberalism thinking is so embedded that people take is as absolute, like a fact of nature ‘its just the way it is’ of course this not helped by compliant media, hammering it him everyday with their paddling pool investigaion and journalism.
I want to scream.
Do, if it helps.