ALEX BRUMMER: Bank of England must stimulate growth

Anyone expecting fireworks and a reprieve from high borrowing costs at the Bank of England’s interest rate meeting next week will likely be disappointed.

The battle against inflation has been won, but market interest rates are moving against an early reduction in borrowing costs. The failure of the Federal Reserve to get a handle on producer and consumer prices in the United States will not encourage boldness.

An independent bank does not have to keep up with America and makes its own decisions.

It is often forgotten that Governor Andrew Bailey, although late in the game, was the first step in ending the era of super low interest rates in December 2021.

All indicators of future consumer prices for Britain are moving in the right direction. Major food price increases have been halted, although concerns remain about the impact of rainfall and flooding on rapeseed oil and other crops.

Wage agreements, which have been at the 5 percent level since the beginning of 2024, have been moderate, but there are concerns about the 10 percent increase in the minimum wage in April. The game changer is energy prices, as they fall out of the consumer price index.

Analysts from HSBC and others claim that nominal interest rates could fall to 1.2 percent in May.

As in the US, there will be concerns that the lower cost of living will be temporary and that prices may start to rise again.

Both fiscal policy and monetary creation have been more expansive across the Atlantic than in Britain.

Forecasters predict a repeat of the three-way split seen at the February Monetary Policy Committee session, when six members voted for hold, two for higher interest rates and one – the estimable LSE economist Swati Dhingra – opted for a cut. Britain quickly emerged from technical recession late last year, which can be eliminated anyway through data revisions.

The crucial point for productivity, production and prosperity is the absence of an incipient recovery.

Monetary policy, high interest rates and the phasing out of quantitative easing (money printing) have long lead times.

The MPC should abandon its misplaced caution, immediately reduce the current bank rate of 5.25 percent and put muscle behind the recovery.

Italian work

Margherita Della Valle has been busy since taking over at Vodafone fourteen months ago.

In quick succession, she has broken away from the highly competitive southern region of Europe, Spain and Italy.

The clean sale of the Italian unit to Swisscom for £6.8 billion is a surprise amid speculation of a more complex Italian deal, which would require antitrust approval.

Vodafone long ago gave up its ambition to become Britain’s global mobile champion after being bullied by investors into withdrawing from a loss-making operation in Japan and a minority stake in the US.

Short-termism triumphed over the more distant prospect of vast riches as the data revolution spawned new revenue streams. A falling share price has led to successive Voda bosses selling their way out of trouble rather than bothering to turn over sub-octane assets.

The task now is to double down on Britain if regulators can be convinced to sign off on the proposed merger with Three.

Della Valle must also restart a decidedly unimpressive German operation and make the most of Africa.

Concentration will help. But long-suffering shareholders, who have seen a legacy betrayed, should not expect a major reversal.

Technical confidence

Holders of Scottish Mortgage Investment Trust (SMIT) have had a dizzying ride. The Baillie Gifford fund grew into Britain’s largest investment trust by making bold bets on Silicon Valley, delivering astonishing returns.

It’s difficult to maintain momentum even with next-generation technologies like Nvidia and Elon Musk’s Space X in the portfolio. SMIT is trying to tame the asset value discount with a £1 billion buyback.

Smart. But what happened to the spirit of adventure?