Bank of England Governor Andrew Bailey is in the cockpit of the British economy
(Picture: PA Wire)City comment: Who would be a rate setter on the MPC this week? It must be like flying through thick cloud with different control panel dials showing that the plane is descending - yet also climbing. Which indicators do you trust to avoid that worst case scenario (for pilots at least) a hard landing on terrain that is unpleasantly lumpy rather than flat?
This week’s data so far points to an economy running warmer than most commentators expected in the chaotic aftermath of the mini-Budget less than three months ago. Yet there is little doubt Britain is already in recession with apparently little hope of UK Plc’s nose pulling up much before the summer. But labour shortages are still holding back growth. Go figure.
My hunch is that the MPC will prioritise jobs and output over inflation by trimming their next rate hike to 0.5%. But there is still a lot riding on the CPI number tomorrow. Forecasts in the Reuters poll range from 10.6% to 11.5%. Anything at the upper end of that - particularly if it is above October’s high water mark of 11.1% and all bets are off.
If inflation is still seen to be accelerating despite the eight consecutive rate hikes that have been thrown at it, the pilots at the MPC may well reluctantly agree that the plane is gaining too much height and throw in another 0.75% rise. It is a tough call and will require strong nerves. There is no autopilot for the economy. So over to you Andrew Bailey and Co. Good luck.
