The central bank governor told business leaders in London that even as the initial shocks from the energy crisis were wearing off and headline inflation would likely fall, “second round effects” were unlikely “to go away as quickly as they appeared”.
Threadneedle Street officials have consistently said that the Bank was raising interest rates to avoid high inflation becoming entrenched in the wider economy through wages and prices.
Mr Bailey acknowledging that such second-round effects are rippling through the UK means that the Bank failed to keep a lid on domestically generated inflation.
It comes as data released on Tuesday showed that private sector wages grew by 7pc in the three months to March, far higher than is consistent with the Bank’s 2pc inflation target.
That’s assuming that Spud understands the point being made there. Or deigns to perhaps.
Is Bailey a buffoon? Good heavens, I did our domestic budgeting on far better predictions (i.e. my guesses) of the inflation rate than he’s managed.
In other words, is Bailey a soul mate of Spud?
P.S. I have been wondering which variety of spud Spud is. How about Majestic?
“… tubers may be prone to growth cracking. Tests show susceptibility to late blight on foliage, Blackleg, …”
I’m not sure the BoE have much more of a clue than the Elyian Sage. The September inflation rate is normally used for indices, and that was officially 10.1%, so wage increases amount to less than 70% of official inflation, i.e. people are still poorer than a year ago in real terms, even if we believe the official figures. When people are poorer, they don’t spend more and thus they don’t add to inflation.
The BoE sat on their hands throughout the second half of 2021 and into 2022 when it was obvious that inflation was real and not “transitory”, and then over-reacted once groupthink caught up with reality. Now, all the signs are that interest rates are not just too high but way too high and the BoE is talking about putting them up further. To be fair to the BoE, all the other central banks seem to be doing the same thing, as if there is a 6-9 month sit-on-hands period before reacting to reality.
Yet another case of what all the damned fools said would happen coming to pass.
Its not as if we haven’t seen this in recent times: All the experts believing what their over complicated models are telling them and refusing to look outside the window and to see what’s happening in the real world.
“as if there is a 6-9 month sit-on-hands period”
When economists talk about “lags” do they allow for lags at the Central Banks?
Hm, I suppose the question is ambiguous.
“I have been wondering which variety of spud Spud is.”
One with thin red skin and yellow flesh, such as ‘Mozart’ or ‘Red Duke of York’.
It’s possible for wages to advance 7%, and people to just about be better off with inflation at 10%.
It depends how the various support measures show up in the inflation basket – certainly the energy support payments totalling £400, local welfare payments, one off payments to those on PIP, and cheap bus fares for workers make a difference of a few % to some people’s total compensation.
Interesting, Theo.
I’m growing some Red Duke of York first the first time this year – stands very tall with interesting red-tinted foliage.
There was a time when Arran Victory would have been in contention but alas no more. As a nod to the Captain Mainwaring of his less repulsive moments, I’d offer Home Guard but, pace V-P, one could always fall back on Ratte.
All the experts believing what their over complicated models are telling them and refusing to look outside the window and to see what’s happening in the real world.
Is that the very definition of a professional economist?
Yes, yes it is.
Related, possibly.
I see that if Ms. Malik’s chums keep having a right go at each other, then there are some concerns about the supply of gum arabic.
https://en.wikipedia.org/wiki/Senegalia_senegal
Maybe Jim could consider ramping up domestic production?
The problem comes from calling inflation that which is not inflation.
Inflation is defined as a continuous rise in the price level. The key word here is “continuous”. A one-off rise in the price level due to say a terms-of-trade shock is not inflation. It should be ignored and not used to justify wage increases which lead to a wage-price spiral.
Not, umm, wholly. A rise in the general price level is inflation. A continuing one is continuing inflation….