ALEX BRUMMER: Interest rate gloom is overcooked

No one can accuse Andrew Bailey of hiding behind architect Sir John Soane’s formidable curtain wall that surrounds the Bank of England.

The Governor escaped from more formal settings for repartee on CBBC’s flagship Newsround program with youthful presenter Ricky Boleto.

The meeting between Bareback Bailey and the country’s youth representative was candid, with the governor acknowledging that there is growing evidence – fuel prices being the most obvious example – that retailers are asking too much.

Until now, the Bank has been reluctant to go along with the ‘greedy’ story.

Consumers are not only fooled at the petrol stations.

The tumultuous 27.4 percent rise in milk, cheese and egg prices over the past 12 months, in a country overflowing with dairy products, is one of the mysteries of the universe.

Banks are part of the scam. Being called into the office of the head of the Financial Conduct Authority to explain why depositors, who have more mortgage customers, are starving for decent returns doesn’t look good.

After a slew of bad inflation, markets are predicting that the Bank’s base rate, currently 5 percent, could reach 6.5 percent next year.

UK bond yields are now two full percentage points above German counterparts.

Oxford Economics argues that second-round inflationary effects have gained traction and are becoming persistent as higher wage growth boosts incomes, giving firms the opportunity to drive up prices. Does Bailey agree?

CBBC watchers were assured that he expects “a pretty marked drop in inflation to 2 percent” next year.

If so, the futures and gilts market may very well be misjudging interest rates. It wouldn’t be the first time.

Capital market analysts too easily ignore real-time numbers.

The latest economic activity data from the Office for National Statistics shows encouraging trends.

The system price of electricity fell by 34 percent in the week to July 2 and is 68 percent lower than a year ago. Watch out the next time a nagging entrepreneur pops up on Radio 4 whining about energy prices.

Job ads are also on a downward trend – as evidenced by Robert Walters’ results showing some of the upward pressure on wages, due to labor shortages, may soon begin to dissipate.

Consumer resilience appears to be immune to rising home loan bills and banks’ efforts to curb exuberance.

Airports are busier than ever, debit and credit card spending is up and this week’s services purchasing managers’ index showed spending is robust.

The Bank of England’s battle against exuberance is a hard slog, but the gloom over interest rates is overcooked.

New money

The more greedy the big banks get, the better it is for fledgling fintech rivals.

Wise has demonstrated how much cheaper it is to make foreign transfers outside of the more cumbersome and costly Chaps and Swift systems.

Newcomer CAB Payments, which specializes in money transfers to emerging markets, has raised £300m in a London listing, valuing it at £851m.

Worldpay, another British-created fintech, once part of Royal Bank of Scotland, is on the move again.

The payments pioneer, which provides the technology behind plastic cards, is being sold by US owners Fidelity National Information Services to Chicago private equity firm GTCR for £14.6 billion, a huge discount on what Fidelity National paid.

The rotating ownership since 2017 is a testament to the short-term thinking of management and investors in the UK and government indifference. British software, patents and innovation are too easily betrayed.

Cash

The dire results of electronics store Curry’s tell two stories. Here, and in Ireland, consumer is holding up and core profit rose 45 per cent to £170m.

But PC World’s owner’s business in Scandinavia is in shambles, with declining revenues and threat from a competition investigation.

The big focus for boss Alex Baldock is on preserving cash as dividends are suspended, pension fund contributions are slashed and capital expenditures slashed. The Greek branch is being prepared for sale.

Currys has turned out to be a survivor.

This time around, Sports Direct founder Mike Ashley, who owns 10.4 percent, could be the ultimate safety net. Imagine!