Interest rates
johnredwood
June 7
The Bank of England is independent when it comes to forecasting inflation and the economy. It has the sole right to fix the Base rate, the crucial short term interest rates that affects the returns of savers and the costs of borrowers,
All the time I was an MP I respected their Base rate power and did not advise on changes. I was critical of their forecasts of inflation when they were obviously wrong.
Now I can write and speak as I like about interest rates. The European Central Bank and the US Fed made similar mistakes to the Bank of England delivering inflations several times target level in 2022. The Japanese, Swiss and Chinese Central Banks did not make the same mistakes and their inflation stayed low, showing the inflation was not the result of lockdowns and the Ukraine war.
Over the last year the ECB has followed a better policy to correct past mistakes than the Bank of England. This week they rightly cut interest rates recognising sluggish growth and tight money and credit. The Bank of England should do the same.
The Bank will probably hold rates claiming it should not move them in an election period. That implies it suspends its own independence. The Bank needs to be seen to be independent on rates. Otherwise not cutting them now will be seen as pro Labour and cutting them now seen as pro Conservative . I think most people do believe the Bank is the independent setter of rates and I have not seen any Conservative government pressures on the Bank over rates.
The U.K. economy has been badly slowed by the Bank’s very tough money policy 2023-4. Inflation will come down as a result. The Bank should cut,especially given its obstinate over the top bond sales.
What do people want their candidates and MPs to do?
johnredwood
June 7
Some contributors here love running down politicians, pointing out their mistakes and inadequacies. Today you can lodge your papers to run yourself if you know how to do it better.
Many people are searching the perfect party or the faultless candidate. Realists accept the task of the voter is to choose from a range of candidates and parties who are fallible, or fall short of our ideal. Our democracy offers plenty of opportunity to lobby, criticise, brief and engage with those who get elected.
Opinion polls tell us of the current dislike of the Conservatives by an important bloc of former Conservative voters. I can understand their frustration at the long COVID lockdown, the Bank’s inflationary money printing, the disruption of energy markets by war in Ukraine and the big expansion of the state to micro manage our lives and the economy as a result. It has meant taxes too high, state services losing productivity and quality, and too much borrowing.
What I also remember was Labour, SNP and Lib Dem wanting longer lockdowns, more handouts, and higher taxes. They wanted an economic policy driven by the Bank of England and the OBR who turned to austerity policies after their big inflationary mistake.
Labour and Lib Dem are short on detail on how to pay for their plans for expanding the NHS and social care. They are agreed on keeping the austerity framework of current economic policy. Neither talk about how they would get productivity back to 2019 levels in public services, let alone get on with raising it. Without an answer to this crucial question they could not deliver their improved services. They would spend and tax more with little to show for it.