to think that the Bank of England will bottle it again?

[LargeDeviation]

As Governor, Andrew Bailey has been pathetic in raising interest rates and winding down QE - started far too late, went far too slowly, and has undermined the whole point of raising rates regularly with his 'commentary' on future rate expectations. By now the BoE rates should already be at 7% plus, and yet they languish at 4%.

No doubt he will use Silicon Valley Bank and Credit Suisse as an excuse to avoid raising rates, even though the UK now has far more stringent ringfencing and capitalisation rules as seen by the orderly sale of SVB UK.

It's got so bad that Jeremy Hunt today had to give not-so-subtle hints to remind Bailey of his legal obligation to target inflation. However, I think the MPC is too weak to take the hint, and in the unlikely event they do raise rates, it will only be by a pathetic 25bps whilst inflation still rages at 10% plus.

Most of the 10% inflation now is core inflation - as core inflation is more sensitive to rate rises than inflation generally, it eliminates the 'BoE can't do anything about it because of Russia' argument.

I don't understand why Bailey is still in post. I don't understand why Blanchflower tribute acts like Dhingra and Tenreyro were ever appointed in the first place.

Catherine Mann is the rate setter who consistently talks sense. She should be made the Governor.

It must be because the entire U.K. economy depends on low interest rates for economic growth?

@MultipleVeganPies Yes, increasing rates will reduce short-term growth - but persistent inflation totally ruins economies - for extreme examples look at Argentina, or Turkey, or Zimbabwe.

The MPC is a bit of a chocolate teapot.

They don't have much choice but to maintain rates largely similar to the US, otherwise the exchange rate will be trashed. They are a bit behind at the moment, which probably is reflected in some of the low exchange rate between the USD and GBP.

So ultimately it will be down to what the Fed do at the FOMC tomorrow. Whatever the Fed do, my guess is that the BOE will do the same at least 1 day later. If not the £ will head downwards, increasing inflation.

I know, I lived in Argentina during the last crisis 😁🥺 so I totally agree with wanting rates to go up, and inflation to be tamed. It was nightmare and lots of civil unrest, and everyone ending up poorer

I just don’t see a rate increase happening here 🧐 The U.K. has a culture of buying everything on credit after all

Even with the huge rise in inflation reported today, I'm sure bottler Bailey will try to minimise the 'pain' and 0.25% it - not realising that tiny pitter-patter rises just prolong the problem.

If he took some decisive action, recognised that surging inflation requires big rate rises fast, and raised rates by 1% tomorrow, the pound would surge and inflation would drop significantly.

People don't have faith in the Bank of England to do 'whatever it takes'.

People don't have faith in the Bank of England to do 'whatever it takes'.

That’s because they want to still be able to pay their mortgages. I agree with you but that’s easy for me because I haven’t got one. I still remember Black Wednesday when interest rates briefly hit 17% and almost being sick on my shoes.

Mortgages will indeed go up. Businesses will be able to borrow less and have to cut staff. People will have to pay more to borrow on credit cards.

All those things are part of the mechanism by which high rates reduce inflation.

It would be painful for those with large non-fixed borrowing whilst high rates persist, yes. However, not doing anything or acting very slowly (as the BoE are doing) will be painful for everyone for years and years.

The Fed has unanimously gone for a 25bps rise. I don't think it's enough there either, but at least in America they started raising rates earlier and more seriously, and inflation is broadly coming down (6% from a peak of 9.1%), and there are more serious questions about bank stability in the US.

I bet Bailey tries to hide behind the Fed as a cover for a 25bps rise here too, even though inflation is still over 10%.