ALEX BRUMMER: Bank of England should hold its fire now the tide has turned in the battle against inflation

Andrew Bailey and the Bank of England have a long way to go to meet the 2% inflation target.

But stepping on the monetary brake harder after the bank interest rate has been raised from 0.1 percent to 5 percent seems like an excessive punishment.

Money markets are pulling back and alarming bets of a bank rate of 6 percent or higher are being removed.

The Labor Party is keen to point out that UK inflation, which has fallen to 7.9 percent, is the highest of the wealthy G7 countries. But the battle is won.

On every measure, the consumer price index (CPI), core inflation excluding energy and food, services and goods prices are falling.

Producer prices, the input costs for many industries, are in negative territory.

The Bank, which had underestimated the threat of inflation when it emerged in spring 2021, has been working too hard recently.

After disappointing price figures in May, it raised interest rates by half a percentage point to 5 percent and ramped up the rhetoric.

The outcome was predictable. Outperforming the G7 on consumer prices, markets have been selling UK government bonds and speculating at official rates of 6 to 6.5 percent.

There’s been nasty collateral damage in the home loan market, with the average cost of two-year fixed-rate mortgages rising to 6.64 percent.

This in turn has led to Britain’s largest listed house builders, such as Barratt, planning new builds.

The contrast between the approach of the Bank and the US Federal Reserve is striking. The Fed was also slow to fight higher prices.

Once chairman Jay Powell recognized the problem, any rate change was telegraphed to the market, limiting the room for overzealous traders.

On Threadneedle Street it was just the opposite. Markets, which have speculated on rising UK interest rates to quell inflation, are retreating.

The Bank should signal that it is time for a pause – no rate hike at all in August – and give recovery a chance.

Cabin wisdom

Black cab drivers are normally a good price for opinions on the evils of Uber and the police’s failure to deal with Just Stop Oil.

It is therefore great to hear that one of them is participating in the debate about universities and study programmes.

Rishi Sunak has expressed his frustration that there are too many substandard, expensive courses and suggested internships as a great alternative.

My taxi driver is very proud that his eldest daughter wants to work in healthcare.

She is offered a place at City University to study midwifery, her passion. It will strain her finances with the prospect of £70,000 in student loans.

Alternatively, she could train as a paramedic, with a good starting salary, and avoid getting into debt.

My driver wonders why there don’t seem to be any midwifery apprenticeships.

This is relevant as his daughter will be assigned to an NHS hospital for clinical experience after her first term at City.

The different options and the financial side of the equation tell us something is going wrong. As good as some internships are – Rolls-Royce, I think – they don’t work.

Data shows that 47 percent of people taking an internship in 2022 dropped out, mostly because the course was worthless.

The driver will support his daughter if she decides to choose the university midwifery option.

If there was more confidence in apprenticeships and if they were offered for a wider range of careers, it could make a real difference in guiding young people into core care professions.

Trading places

The assumption has long been that plain, vanilla High Street banking is a safer space than investment banking.

Not, it seems, if the bank is Goldman Sachs, with dealmaking and trading in its veins.

Profits plummeted 60 percent in the second quarter as Goldman wound down its foray into consumer businesses, taking a £391m write-down on Green Sky, which provided home improvement loans.

The Wall Street firm has also pulled out of Marcus, its online consumer banking arm, which has collapsed into its asset management business. The lesson for other bankers: stick to the knitting.