What can be done regarding the Bank of England, asks HAMISH MCRAE?

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What should be done about the Bank of England, asks HAMISH MCRAE?

The Bank of England will be under intense political pressure to change how monetary policy is handled, but there is a real risk that the new PM and Cabinet could make things worse rather than better.

Not only has the Bank failed miserably to control inflation currently, but it also failed to recognize how serious the threat might become more than a year ago.

Central bankers as a whole have failed in this situation.

The Bank appears to believe that the outlook for inflation in this country is worse than in the US or Europe, and they may be right.

The most recent figures, however, are essentially the same: 9.4% for the local CPI (and 8.2% for the CPIH measure, which includes housing costs).

Comparatively, the US has a 9.1% unemployment rate and the eurozone has an 8.9% unemployment rate.

What makes the situation different is that, while the Federal Reserve and the European Central Bank are still more upbeat, the Bank of England is operating in full panic mode.

Jerome Powell, the head of the Fed, stated last week that the organization did not believe it was necessary to raise interest rates because it did not intend to start a recession.

The key ECB projection is that neither this year nor the following year will see a recession.

The Bank of England, in contrast, predicts that the economy will contract both in the ensuing year and the one after that.

The financial markets were greatly underestimating that.

Bloomberg’s analysis of the consensus opinions of City economists predicts growth of 0.6% in 2023 and 1.5% in 2024.

In this case, I would agree with the markets.

Regarding inflation, the Bank may have been correct in predicting a peak of 13% at the end of this year, but that also strikes me as being overly pessimistic.

There are many factors at play, including wholesale gas prices, which could skyrocket if Russia completely cuts off supplies.

Though the cost of energy is generally declining.

On Friday, the cost of a barrel of Brent oil was $93 USD.

That is significantly lower than the (dollar)122 peak it reached in March and is even marginally lower than the (dollar)23 level it reached on February 23, the day before Russia invaded Ukraine.

Pump prices for gasoline and diesel have not decreased significantly because the value of the pound against the dollar has decreased.

However, that dollar story is really compelling.

The pound is near the top of at €1.18…

Kurzfassung der Nokia-News.

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