Bailey blames prices: Bank of England’s failure to attack inflation sooner proves very costly, says ALEX BRUMMER
The abject failure of the Bank of England to quell the scourge of inflation is costing the nation dearly.
Ahead of today’s April consumer price data, Gov. Andrew Bailey told MPs the bank needs to think hard about how it conducts monetary policy in the face of major shocks.
Chief economist Huw Pill further noted that the models used by the Old Lady’s analysts could not cope with extreme changes in energy and food prices.
The impact on the cost of living, with many prices rising by double digits, is detrimental to production.
The International Monetary Fund has changed its mind and increased the UK’s growth rate. Now the IMF says its forecast could have been more robust had Britain not felt the need to tighten fiscal and monetary policy to curb inflation.
Uncertainty: Andrew Bailey (pictured) told the Commons that the Bank of England needs to think hard about how it conducts monetary policy in the face of major shocks
The fund does not expect aggregate prices in the UK to return to 2% until mid-2025.
Prime Minister Rishi Sunak will be relieved that the IMF forecasts that inflation will be halved to 5 percent this year.
That is a core promise of the government. The Bank’s failure to address inflation earlier and its decision to keep super-low interest rates for too long is proving costly.
The latest lending figures show the budget deficit widening to £25.6bn in April, £3.1bn above the March forecast.
The Office for Budget Responsibility points out that the main drivers behind the rising borrowing are interest payments on government debt, up £3.1bn from a year earlier, and higher social spending.
None of these factors are likely to moderate as prices rise.
Almost a quarter of Britain’s national debt is held in inflation-indexed gilts.
Cost-of-living wage settlements in the public sector and an increase in state pensions and benefits will not help. Bailey and the anxious Monetary Policy Committee made mistakes that hurt us all.
Dial in
These are tumultuous times for BT. Last week, CEO Philip Jansen revealed plans to cut the telecom giant’s workforce by 55,000 by 2030 as the push for all-fiber broadband comes to an end.
Now French-Israeli tycoon Patrick Drahi, owner of auction house Sotheby’s, has increased his 18 percent stake in BT to 24.5 percent.
Drahi has reiterated that he does not intend to make a full offer for BT, taking that option off the table for at least six months.
Nor do past business decisions show him to be an activist content to just make noise and make a profit.
Telecom runs through his veins and he has made his mark on the industry in France, the US, Portugal and Israel.
Everything indicates that Drahi’s investment in BT is strategic and that he has a long-term interest in UK communications.
Indeed, his commitment could be seen as evidence that international investors are attracted to the UK, despite attempts by opposition parties to belittle and undermine confidence.
Drahi is currently not seeking a seat on the BT board. That could well be the result of entering into a working relationship with Jansen, with both entrepreneurs sharing a common interest in extracting value from a piece of British infrastructure that has been left undirected.
A slimmed down BT with a mid-21st century broadband network and a popular mobile network in EE could provide the basis for stronger revenues and further deals.
Don’t expect Drahi to sit on his hands.
Shell is shocked
Scenes of activists trying to storm the stage at Shell’s annual general meeting in London could be seen as a good reason to support M&S chairman Archie Norman’s campaign (launched in The Mail on Sunday) to give shareholders more access through regular online sessions with drivers.
I do not agree with it. Live AGMs are often boring, attracting eccentrics and small investors alike looking for a free sandwich or beer, but they have an honorable history of moving the dial.
The pressure placed on the Barclays board during the apartheid era in South Africa eventually led to divestment and the fall of a racist government.
Similarly, efforts to drown out chairman Andrew Mackenzie’s words and Follow This’s dissenting voices will, over time, make Shell think harder about green goals and bring more environmental voices into the oil giant’s board. It happened at Exxon, why not Shell?