Money versus job satisfaction. It is the perennial professional quandary, but there may in fact be one exception: central banking. Jerome Powell, chair of the US Federal Reserve, earns $190,000 per year for the privilege of overseeing the greatest economy the world has ever seen. I'm not saying the job is easy, but when Powell raises interest rates, inflation falls and GDP continues to grow. Oh, and possession of the global reserve currency must be nice, too. In other words, boring.
But on the flip side of the coin is Andrew Bailey, Governor of the Bank of England. Not only does Bailey enjoy a vastly higher annual salary of £495,000, but he gets to oversee a rollercoaster of an economy replete with sterling crises, pensions crises and a private sector that would not know sustainable growth if it alighted at Bank and introduced itself. So more money, more fun – it is surely no contest?
I mention this because yesterday evening, Powell announced that the Fed was cutting interest rates by 50 basis points to 4.75-5 per cent. This was both more than many analysts expected, and also the first time rates had fallen since before the Covid-induced inflationary cycle began. And why not? Inflation in the US is nearly down to the target of 2 per cent and the economy is expected to grow by 2.4 per cent this year. In other words, Powell has secured the much-vaunted 'soft landing'.
Well, hopefully. Having slain the inflationary dragon, the new concern is employment. The US labour market now appears to be showing signs of softening, with non-farm payrolls coming in at an underwhelming 142,000 in August. To that end, Powell has said the Fed would “do everything we can to support a strong labour market as we make further progress towards price stability."
The Bank of England did not follow suit today. Instead, it kept interest rates steady at 5 per cent, albeit having already cut rates by 25 basis points last month. While UK inflation is also close to target and the economy is, as usual, flatlining, there remain concerns about elevated services inflation, hence the 8-1 vote by the Bank's Monetary Policy Committee to leave rates unchanged.
My grandfather, Willie, liked to say that if you enjoy your job, you are lucky. But if you can learn to enjoy it, you are smart. I think there is some truth to this, but given that that latter applied to him, it was, on reflection, also an opportunity to call himself smart. Which he was, by the way, as well as kind and funny. Anyway, if Bailey has not learned to enjoy the thrill ride that is maintaining the stability of the British economy, he is in the wrong profession.
