![]() ![]() It’s a pressure the Old Lady of Threadneedle Street, to at least some extent, has brought upon herself. ![]() Monetary policy operates with “long and variable lags”, as Milton Friedman taught us – so there was already plenty of monetary tightening in the system that needed time to work through.īut with inflation so high – still over four times the Bank’s 2pc target – the MPC has been under huge pressure to take unrelenting, repeated action, without pausing to gauge the results. One reason I wanted rates held in April is that, up until then, the Bank had already increased borrowing costs 11 times in 14 months – from 0.1pc in December 2021. That, to my mind, was an even bigger mistake. Now, of course, following Wednesday’s news that headline inflation was still 8.7pc during the year to May, unchanged from the previous month, the Bank raised rate again, announcing a bolder half-point jump to 5pc. ![]() The Bank’s Monetary Policy Committee (MPC) clearly thought otherwise, raising baseline borrowing costs the following month by a quarter point to 4.5pc. Back in April, when UK inflation was 10.1pc, this column argued the Bank of England should hold its headline interest rate at 4.25pc. ![]()
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