Now the Q. is whether the BoE will make good on its talk of a shift down in interest rates (but don't expect a major reduction), or whether oddly, the headline rate doesn't reflect what they see as 'real' inflation...
If the latter, then, they'll be some crocodile tears & an assurance that of course rates will be coming down soon.... just (again) not quite yet.
Watch the sado-monetarists shift the goalposts (again).
The BoE will be (I should think) suggesting interest rates should not go down yet, after ONS reported wage rises remained at 5.7% over the last 3 months.
But, a focus on nominal wages is misleading; it takes no account of inflation adjusted real wages, that continue to lag behind pre-austerity levels & so by only focussing on recent months underplays (obscures) that wages are catching up previous loses....
So prepare for a longer wait for interest rates to drop
Ha ha... once again like Lucy & Charlie Brown, the BoE holds interest rates steady, but offers the prospect of a cut in the future... just whisk that ball away Mr. Bailey (each time).
I'm sure they'll eventually cut the rate but the sado-monetarists need more 'evidence' before they do;
but not evidence that inflation is easing, whatever they say; rather they want evidence that workers have been properly tamed/beaten down, that they/we have been disciplined!
Huw Pill, interest rate hawk & paid up sado-monetarist at the BoE, said today:
'in my view there are greater risks associated with easing [interest rates] too early should inflation persist rather than easing too late should inflation abate'...
In other words, never mind your standard of living folks, we want you to suffer a bit longer.... because the risk to your wellbeing is a lot less serious than the (self-interested) sentiment of our banker mates!
While Ben Bernanke has tabled a range of issues to be resolved if the BoE is going to get better at predicting inflation, the most telling issue is BoE's over-reliance on what 'markets' think inflation will do (even if the financial sector's views varied from the MPCs own)....
In other words (& this really is no surprise), interest rates' policy (related to inflation) has been too dependent on the sentiment of a small cabal of investors!
As the IMF warns one of the reasons that the BoE may have seen a lag in the effect of its interest rate policy is that the UK's wide take up of fixed-rate mortgages has sheltered many from the effects of rate rises.
This suggests that the longer interest rates remain high(er), the recessionary impact will grow as householders come the end of fixed-deals on their mortgages.
A policy over-shoot (which is already happening) would then get worse!
Before you believe the BoE that its interest rate policy has been a success because it has clearly bought down food inflation for the UK's population.... its worth noting that food inflation has declined to around the same rate as in the UK across all 38 members of the OECD.
This reinforces the argument that non UK-related issues were causing such such inflation in the first place & using interest rates to try to constrain inflation was not a well-directed policy.
So, as UK inflation continues to fall (retail price inflation was 1.3% in March; we await the ONS-CPI figure), the BoE will be casting around for reasons not to lower interest rates yet...
The Sado-Monetarists of Threadneedle St. will only be satisfied when unemployment is rising... they'll be lots of pious words about prudence & complexities of inflation, but in the end they've not inflected sufficient harm on workers yet to ease off on rates.
After keeping interest rates at 5.25%, Andrew Bailey has been reported to be 'upbeat' on the UK's economic prospects & signally a future rate cut is now going to be sooner rather than later....
Well, you can believe that if you wish but in my view the senior Sado-monetarist of Threadneedle St. is gaslighting us; in 3 weeks time, he'll have some reason to to row back on his positive sentiment & keep rates higher, just than little bit longer....
Those of you who entered the sweepstake on why the Sado-monetarists of Threadneedle St. would say they're not cutting interest rates this month won if you had:
a. it still too early to be sure inflation really has subsided
or
b. we're not interested in headline inflation anymore we prefer to look at disaggregated service sector inflation.
Other possible reasons (wage-price spiral/external shocks) were not strongly enough articulated for a payout - sorry.
I’m simply over the moon to whack another chunk of my hard earned cash to #AndrewBailey and his banker mates who are now running London. It’s such a privilege to be paying these folk, knowing the great work they do. Beyond the crippling #interestrates I’m always especially delighted that they deliberately designed a national mortgage market that’s massively more expensive and destabilising for customers than the one they designed in the USA. #gtto#30yearfixedrates
The #FederalReserve is still eyeing 3 #InterestRate cuts this year, as ofcls wait for a bit more confidence #inflation is reliably falling to more normal levels.
At the close of their 2-day meeting on Wed, central bankers left the benchmark interest rate steady at between 5.25 & 5.5%. Ofcls also released projections that showed 3 rate cuts to come in 2024.
Still, financial #markets, analysts, businesses & #consumers are eager for a more precise timeline on when the #Fed will decide to trim rates. #Inflation has made considerable progress since soaring to 40-year highs. But price growth is still too fast, & the Fed isn’t ready to declare victory until ofcls are more certain that inflation is on its way to their 2% target.
"Your best example of this is Japan, which made no change whatsoever to its interest rate [after the COVID pandemic began], but experienced much the same increase in inflation, and then fallback again afterwards. So interest rate is not a control and not a fine tuner for the economy in the way that neoclassical economists believe it is."
Lots of talk about the "pandemic boom" but not one mention of rising interest rates which I'd wager is a bigger part of the equation seeing as how #Layoffs are affecting more than just the #VideoGames and #Tech industries. When you live through the better part of 15 years with near 0 interest rates, borrowing so cheaply, then #InterestRates rising again is inevitably going to have an effect. It is very likely that these companies over leveraged themselves on cheap credit and are now feeling the pinch.
What is going on with layoffs in the video games industry?
In July, when Clare Lombardelli joins the BoE #interestrates setting group, the MPC, it will for the first time become majority #female... there is a long tradition in critical political economy, arguing that women can & would do #economics differently, so now we may have a real world experiment to see if that is really the case.... after all they can now outvote the men on interest rates.
Well. well, well, Catherine Mann (BoE) now admits that #inflation is not going down, not because of #workers trying to repair their living standards... but because the services where price rises are continuing to be high, are the ones serving the wealthiest part of the population, whose finances are relatively unaffected by the high(er) #interestrates!
So, will they be trying to find a mechanism to discipline the rich... more likely it'l be treated as an unfortunate area policy cannot reach!
If the BoE is looking for causes of #inflation, it should worry a little less about the ONS crisis in labour market data, and #interestrates setters obsession with a wage/inflation cycle, and look at the various sectoral oligopolies that stifle competition & allow price rises to be forced on customers....
This week data reveals another sector where this is happening:
Corporate auditing.
The effective oligopoly of the Big Four #auditors has allowed them to increase fees 75% since 2018!
Andrew Bailey (BoE Governor) seemed to soften his position on an earlier reduction in #interestrates as he claimed (to the Treasury Select Comm.) he could now detect real signs #inflation was 'beaten'.
However, I'll believe it when I see it; he has been effectively gaslighting us for some time, and this may be more of the same.
He also revealed his Sado-Moentarist character, asserting: 'ultimately it’s monetary policy & the credibility of monetary policy that determines the rate of inflation'!
Federal Reserve Indicates that Interest rate cuts may come soon. (abcnews.go.com)
Interest rate cuts would carry benefits for many consumers -- but not all, experts said.