Every weekend in the press at the moment I seem to find one or other prominent #politician and/or political commentator, claiming that:
[policy x] is not working, but that's because [policy x] hasn't been implemented in the way it should... it must be done as I intended.
From #Brexit, to #privitisation, from #interestrates to #migration, somehow those who were instrumental in imposing the 'solutions' on us, think they can escape blame by claiming 'its not being done properly'!
There's a simple fact behind the seeming anomaly of #mortgage rates going down (albeit remaining above what they were last year) & the likely continuance of #interestrates rises from the BoE.
If you are a mortgage provider you need to lend money to make money; if your prospective customers don't feel they can afford a mortgage then you either try to screw more money out of your existing borrowers or (because this is tough with so many fixed deals), you reduce your prices!
Huw Pill of the BoE makes pretty clear that #interestrates policy is a disciplinary measure:
'Lower interest rates are a reward to the economy for better inflation performance'....
So, once you #workers have stopped misbehaving by trying to rebuild your living standards, we your overlords will reduce the interest rates you have to pay.
And so, if we all remain good, Pill & his chums will likely reduce the rates in six to eight months time...
Oh, I'm so grateful Mr Pill & I promise to be good
The most important political economic Q. for the UK right now is how deep a #recession is the #BoE (& by extension the #Tories) prepared to engineer to 'tame inflation'?
As usual, those paying the price to reduce inflation, through the #Costoflivingcrisis & a descent into #poverty, are not the same people saying the 'price is worth paying'.
Using only #interestrates to deal with inflation is a political choice taken by those who have a clear notion of how to protect the interests of the rich!
Just nipped in Asda.
The guy putting the prices up didn't even flinch when something went from £3.35 to £5.00.
Let me know what that % of increase that is, please? #costofliving #prices #interestrates #inflation
For those of you who've been following the debates (in my timeline & elsewhere) on the Q. of #inflation, #greedflation, #profits & #interestrates, here's a nice summary from Prem Sikka of his views (which complement what I've been saying):
the roots of current inflationary problems are in corporate enrichment not in any (mythical) wage-prices spiral;
Oh, I see the #ONS has revised down its estimate for GDP growth in Q2, so alongside the decline in Q3, we are now in a technical #recession.... which is exactly what's the BoE want, so perhaps will now reduce #interestrates, now that the recession has started.... and given the lag of effect of interest rates changes we can expect 2024 to be mostly recession - which will serve those pesky #workers right for asking for pay rises!
As #interestrates reach a new (recent) record, I have written something for @NWBylines looking at how #inflation & interest rates relate as 'problem' and 'solution'
As you'd expect I draw a distinction between who is most worried about inflation & who pays the price to 'fix it'.
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.
#Interestrates on #debt include a substantial element that prices in the risk of default. So a higher interest rate indicates a judgement about your propensity to repay the loan.
April Mortgages are launching a model (from the #Netherlands) that sees the interest rate decline at the loan is repaid (and the risk of default declines).
This also suggests longer #mortgages in the UK have over priced residual risk....to #banks' benefit!
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!
So Huw Pill of the BoE admits that #interestrates policies are a 'powerful' but 'blunt' tool to fight #inflation while warning that high(er) #food prices are likely here to stay for some time.
He went on to say that the BoE cannot mount 'surgical strikes' to help certain sections of society... (that would be unless its the #banking sector I assume?)
Accepting its not was wage rises driving inflation, he's decided that its imported!
Yup, we've moved to the foreigners are to blame narrative!
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Jerome Powell talks plenty about data-driven decisions on interest rates. Fair enough. The business press should take the same data-driven approach and use the performance of the Dow Jones in response to his comments as a measure of his performance. Every time Powell unnecessarily references the need to do more to combat inflation, the market reacts negatively, and he needs to be held accountable. Even if he complains that it's unfair, we should make judgments about Powell's job performance strictly on the basis of whether what he says and does WRT interest rates causes the Dow to nosedive. Today, Powell took a 200-point gain on the Dow and knocked it down to zero. That says his job performance sucks. And that is the only way to measure how good a job the Fed is doing... #Fed#Economy#DowJones#InterestRates
So #inflation has now dropped to 3.9%, reflecting (if #economic models are correct) the #interestrates environment around a year ago (the time it takes interest rates to feed into the 'real' economy).
Given this trajectory (successive falls in inflation), we might expect the BoE to start to reduce interest rates.... but given the continuing rhetoric about 'worryingly high' wage rises, my guess is they will stick with them where they are.
What they want is a recession to 'discipline' #workers
UK inflation stays at 8.7% despite hopes of a fall - BBC News (www.bbc.co.uk)
Food prices remain stubbornly high, cost of living crisis is really starting to bite....
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.
Inflation Eases to 3.3% in May, Slightly Lower Than Expected (www.wsj.com)
Core prices that exclude volatile food and energy items climbed 3.4% from a year earlier