The Bank of England announced at midday today that it was leaving interest rates unchanged at 5.25% this month. Scrooge is in the counting-house for Christmas.
That is not the full story though. As the minutes note:
Six members (Andrew Bailey, Sarah Breeden, Ben Broadbent, Swati Dhingra, Huw Pill and Dave Ramsden) voted in favour of the proposition. Three members (Megan Greene, Jonathan Haskel and Catherine L Mann) voted against the proposition, preferring to increase Bank Rate by 0.25 percentage points, to 5.5%.
The reason for the decision to hold is noted as being concern that there is insufficient evidence of a downward trend in inflation as yet. This is despite this evidence from the Office for National Statistics:
And this is also despite the fact that the Bank of England itself has forecast that inflation will fall as follows:
In other words, they think the pattern clearly evidenced in ONS data will continue, suggesting that current high-interest rates are likely to overshoot requirements unless reversed very soon - which reversal Governor Andrew Bailey is saying is very unlikely at present.
Two questions follow. First, what is it about the data that they do not understand?
Second, what is motivating their actions?
I can't answer the first question without involving stupidity in the answer.
On the second point, the three who voted for increases in interest rates despite this data all have one thing in common. They are all independent members of the Monetary Policy Committee. And, two have had very close links with the financial services industry that stands to gain from an increase.
There are, of course, no representatives of working people, mortgage account holders, small businesses or any other interested party on the Committee. Only bankers and those sympathetic to their cause get a look in.
No wonder we are in such a mess.
In the name of democracy, this kleptocracy must go.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
It reminds me of this
Those whom the gods wish to destroy, they first make mad.
Alas, the gods’ victims are not the morons on the MPC (as justice would suggest – deman even) but the poor old man and woman on the Clapham omnibus, namely, Joe and Jane Bloggs.
The MPC members, even those who voted for a hold, rather than slashing the rate to a more acceptable 2.5% +/-, and CERTAINLY those who voted for an increase, are clearly infected by what I call moronavirus, the virus that turns brains and consciences to moronic mush!
Thanks for showing the actual data which I can only assume the members haven’t actually looked at! I expect the following have been quoted before on the blog but I think should be regularly asked…
Tony Benn’s 5 questions of those in positions of economic, social and political power should be asked of all of the members:
1. What power have you got?
2. Where did you get it from?
3. In whose interests do you use it?
4. To whom are you accountable?
5. How do we get rid of you?
He was excpetionally perceptive
In the discussion on BBC R4 pm programme – they talked about wage inflation and core price inflation 7% and 5% etc etc – but not a hint of a question or any interest in bank profits up 46% etc or who on earth the monetary committee represent. This isnt journalism – just pretence of journalism – propaganda.
Maybe they are like Johnson and can’t read charts and graphs!
This is all about looking down on the people you are supposed to be serving – it is a world driven by greed.
There is now seemingly no pretence about exploiting us 24hrs a day, 365 days of the year.
With TV channels running faux documentaries about retailers and then adverts in between, we are reaching capitalist nirvana .
I think I would point to Minute 37 on their statement; “As anticipated, tighter monetary policy was leading to a looser labour market and was weighing on activity in the real economy more generally.”
That seems to be what this is about; punishing the poor to prevent stop an imaginary wage-price spiral, no matter the cost.
As far as I can see from this BoE MPC members voting record (https://www.bankofengland.co.uk/-/media/boe/files/monetary-policy-summary-and-minutes/mpcvoting.xlsx) and I have lined up the data headings to latest decisions – it should be in the opposite order to the way it is listed to aid readers (14th December, 2023); three external members (Greene, Haskill and Mann) voted for a 5.5% interest rate. Everyone else voted for 5.25%. Not a single vote to lower rate, by any margin.
Here is the issue. The Covid Inquiry has already thrown up the problem of ‘Groupthink’; but the greatest example of Groupthink we have is in the BoE MPC, and screaming the neurotically narrow its assumptions. The problem with bankers is they are incapable of thinking for themselves; indeed they prefer to go over the abyss together, because the worst outcome for them as individuals, is to be caught making a mistake, all on your own.
Funny.. not long ago, Megan Greene was doing the media rounds posing as some sort of progressive. Presumably pitching for some other gig she didn’t get.
“While anticpating falling inflation, the Bank remains concerned that the balance of bargaining power between wage labourers and the employer/investor class may have altered in the former’s favour. This will not do.”
(I’m paraphrasing slightly)
““While anticpating falling inflation, the Bank remains concerned that the balance of bargaining power between wage labourers and the employer/investor class may have altered in the former’s favour. This will not do” (commenter’s paraphrase of BoE statements).
The irony here is that the switch in bargaining power is a function of labour shortages, not merely gratuitous wage demands; as the BoE assumes. The BoE should understand the nature of this problem, but clearly doesn’t. Labour is not produced by command or exhortation, unless there is an abundance of surplus labour. Strangely, I would have surmised market-obsessed bankers and economists may grasp this point.
The shortages in the UK are a function principally of Brexit, and the labour simply is not there to replace what has been lost, and it is not available. It cannot be commanded, because labour is a function of demographics and an available pool of willing labour, with the skills to fill the roles available. Where is the evidence there is an abundance of this ready solution? Even with significant immigration from elsewhere in the world, the shortages are not being filled. These are just facts. Such changes, brought about by sudden, drastic shortages of labour (not monetary policy) are fundamental, and are not turned round by tinkering with interest rate policy, because interest rates do not produce labour.
There are long established precedents for the paradigm shifting propensities of serious labour shortages. The death knell of feudalism was rung long before it finally arrived; but the bell was tolled by labour shortages, not politics or power. The most decisive change in European history for the power of labour, was created by the Black Death. The population fell and labour was scarce. For the first time labour was able to command a price, and a foothold of independence, because unavoidable scarcity determined its price.
The current labour predicament is not of course as catastrophic; but the demographics of Britain shows a falling birthrate, below replacement; and an ageing population that changes the whole country, and its needs. Covid and Long Covid, along with the changes in life expectations and aspirations they brought into our culture, the crisis in the NHS, care sector and numerous industry sectors, along with changing attitudes to work are all compounding the problem; plus the disaster for labour availability wrought by Brexit, have together funnelled the problems into a vortex of labour shortages that are not being fixed, but actually being made worse by irrelelvant government and BoE policies; focused on failed economic ideology or cynical politics.