The best way to deal with that is to engender growth – so the debt burden falls as a share of GDP. Further rate rises now, when inflation is set to tumble anyway, could stamp on the UK’s still fragile recovery, aggravating our fiscal predicament even more.
The cost to motorists of filling up is already falling, with fuel prices 4.6pc down on last March – although diesel is, for some reason, still much more expensive than petrol. Another very promising trend in the data, lost amidst the focus on the CPI number, shows global supply chains are also finally escaping from lingering lockdown-related chaos.
Freight shipping rates are close to pre-Covid levels and those notorious semiconductor shortages have also significantly eased. Producer input inflation – capturing the prices faced by firms to produce the goods and services they then sell us – tumbled from an eye-watering 24.5pc last June to 12.7pc in February.
PPI inflation then dropped considerably again, to 7.6pc in March, dipping well below CPI – a striking signal that headline inflation will soon fall sharply as well. This PPI data is key, should any of the nine MPC members want to make the case, when the committee deliberates next month, to keep rates on hold.
I’m not sure that any will – because to do so would be to push back against entrenched conventional wisdom. And the MPC, in sharp contrast to the cognitive diversity among members during the years immediately after 1997, when the Bank first gained independence, has since been unduly hobbled by groupthink.
In March 2021, when CPI inflation was just 0.7pc, Bank of England Governor Andrew Bailey said: “Viewed from where we are today, our task is to get inflation up to target.”
That same month, this column warned that “huge post-lockdown demand … means inflation could soon surge” not least due to the UK’s “deep dependence on quantitative easing” during the pandemic.
No one is saying monetary policy is easy, but the signs are now there, as they were two years ago, to set policy correctly, even though that means defying conventional wisdom. They MPC missed such signs last time – and will likely now do so again.
Follow Liam on Twitter @liamhalligan
Bank of England should escape groupthink and keep interest rates on hold
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The best way to deal with that is to engender growth – so the debt burden falls as a share of GDP. Further rate rises now, when inflation is set to tumble anyway, could stamp on the UK’s still fragile recovery, aggravating our fiscal predicament even more.
The cost to motorists of filling up is already falling, with fuel prices 4.6pc down on last March – although diesel is, for some reason, still much more expensive than petrol. Another very promising trend in the data, lost amidst the focus on the CPI number, shows global supply chains are also finally escaping from lingering lockdown-related chaos.
Freight shipping rates are close to pre-Covid levels and those notorious semiconductor shortages have also significantly eased. Producer input inflation – capturing the prices faced by firms to produce the goods and services they then sell us – tumbled from an eye-watering 24.5pc last June to 12.7pc in February.
PPI inflation then dropped considerably again, to 7.6pc in March, dipping well below CPI – a striking signal that headline inflation will soon fall sharply as well. This PPI data is key, should any of the nine MPC members want to make the case, when the committee deliberates next month, to keep rates on hold.
I’m not sure that any will – because to do so would be to push back against entrenched conventional wisdom. And the MPC, in sharp contrast to the cognitive diversity among members during the years immediately after 1997, when the Bank first gained independence, has since been unduly hobbled by groupthink.
In March 2021, when CPI inflation was just 0.7pc, Bank of England Governor Andrew Bailey said: “Viewed from where we are today, our task is to get inflation up to target.”
That same month, this column warned that “huge post-lockdown demand … means inflation could soon surge” not least due to the UK’s “deep dependence on quantitative easing” during the pandemic.
No one is saying monetary policy is easy, but the signs are now there, as they were two years ago, to set policy correctly, even though that means defying conventional wisdom. They MPC missed such signs last time – and will likely now do so again.
Follow Liam on Twitter @liamhalligan
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