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Bailey has been a disaster, hiking rates base rates to a 16-year high of 5.25 percent, even though the policy has done nothing to drive down consumer prices. Today’s inflation is driven by forces beyond the BoE’s control, such as oil and gas prices, and post-pandemic supply chain breakdowns.
Broadcaster and economics expert Roger Gewolb is demanding that Andrew Bailey cuts interest rates now.
He also says that Chancellor Jeremy Hunt must slash taxes to get the economy moving. If they don’t, “both should resign immediately”.
Gewolb, who has advised the Bank of England, Treasury and Ministry of Finance, said UK economic policy is a disaster. “We are being crushed. Unnecessarily. Bailey refuses to lower interest rates. Hunt refuses to lower taxes.”
He added: “Britons are suffering because of inept leadership, and Labour is not offering any viable or even clear alternatives.”
Bailey never should have raised the base rate 14 times in the first place, Gewolb added. “We don’t have consumer-driven inflation. Food and energy prices have now fallen by themselves, as they always do.”
He accuses the BoE of the “unbelievable” decision “to crush British households and businesses so viciously and for so long” with pointless rate hikes.
Half a million British businesses are close to failing as they struggle with higher borrowing costs. Mortgage arrears are up by 50 percent and getting worse as homeowners struggle to keep up with rocketing repayments.
The BoE is run by dinosaurs, Gewolb added. “The Baileyoceros and his thick-skinned BoE colleagues who won’t listen to anyone have got to go and go now.”
Gewolb’s furious attack will resonate with many, including me.
Bailey arrogantly dismissed the inflation threat, saying it was “transitory” and would soon pass. Then he woke up to the threat too late, and overreacted by hiking interest rates again and again.
The policy no longer has any point. Higher borrowing costs will do nothing to curb energy prices or the cost of imported goods.
Just a few days ago, Marks & Spencer’s chairman Archie Norman dismissed the BoE out of hand.
He said: “What we’ve proved in the last three years is that monetary policy is totally ineffective.”
The recent slowdown in inflation has nothing to do with the BoE or the chancellor, even though both want to take credit for it.
It’s all been driven by factors beyond their control.
All those rate hikes have had only a “marginal” impact on inflation, Norman said. BoE policy has had “no bearing on the price of gas. It had no real bearing on the price of food”.
That won’t stop the BoE, though, partly because Bailey hasn’t got a clue, and partly because interest rate hikes are his only weapon in the fight against inflation. So he has to keep banging away with it, even though it doesn’t work.
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The BoE’s former chief economist Andy Haldane has felt compelled to speak out, blasting his former employers in February.
He warned the BoE risks “crushing” the economy by failing to cut interest rates fast enough.
Haldane warned that keeping base rates too high for too long could prolong the recession, and hammer the BoE’s credibility.
It’s a nightmare, frankly, and we seem to be trapped in it. Two members of the BoE’s rate-setting monetary policy committee (MPC) have repeatedly voted to hike rates 5.5 per percent. It’s incredible. We need cuts.
Genius Albert Einstein famously said that “Insanity is doing the same thing over and over again and expecting different results.”
It sums up the BoE’s interest rate strategy beautifully.
I don’t expect the BoE governor to be a genius, but a few signs of sentient life would be welcome. Instead, we’re stuck with “stupid”.
