Core inflation above 7% sets alarm bells ringing on Threadneedle Street
Completely disagree. Democracy works only if all the institutions do what they are supposed to do. The Bank of England role is to tame inflation generated endogenously by excessive risk taking, leverage and easing of financial conditions. It’s not the job of the Bank of England to tackle the inflation generated by two exogenous shocks like covid and the energy crisis. It’s the role of the government to do so and the Bank of England should admit the limited tools at its disposal and point the finger to the Chancellor whose disgraceful policies are at the heart of this mess. The energy cost related to the war should be paid fairly by everyone. The Tory clowns decided to subsidise the entire energy crisis to virtually everyone even those who could afford to pay supporting demand further and pushing inflation higher. Now the Chancellor wants mortgage holders to foot their bills which affects mostly young working families but doesn’t have the guts to steal from their pockets given upcoming elections and wants to blame the BOE. The central bank should be transparent and openly saying what the government is doing but nobody is reporting. BOE stands for Bank of England and not for Boomers of England. They are independent and should have no role in stealing from working families to pay for the money given for free to pensioners and wealthy individuals or if they do so they should tell what they are doing. Instead of the useless monetary policy reports they should publish a termsheet stating what’s causing inflation, why they are raising rates snd who is going to pay for it with their estimates split by households/corporate, age groups and geography. That would trigger a desperately needed debate about who at the end of the day is paying the bills to run the country.
Great piece- thx - You say "core inflation will naturally drift lower unless spending is expected to keep accelerating" ... As rates rise, interest paid on debt rises, thus gov and private spending rises, triggering more rate increases and so on. The question is at what point (debt/gdp) does the inflationary interest expense overwhelm the deflationary credit contraction impacts of rate increases? Pblacque