Finance campaigner, business entrepreneur, broadcaster, and geopolitics/economics trends expert, Dr Roger Gewolb, head of the Campaign for Fair Finance ™ and Fairmoney.com, slams Bank of England’s governor Andrew Bailey’s credibility after UK inflation data release and insistence on battling “persistent inflation”.
“Falling petrol prices led to a decline in inflation, which new data shows dropped to 3.9% – the lowest rate in two years, well below Rishi Sunak’s target of 5% by year-end. It has absolutely nothing to do with anything Messrs. Hunt, Sunak or Bailey have done to curb inflation”.
The UK is currently experiencing a series of monetary policy shocks, Roger Gewolb’s analysis and comments have proved him to be well ahead in predicting the current outcome; “The Bank of England now faces another dilemma, the risk to have raised interest rates late and excessively, worsening our economy and growth prospects and exacerbating the cost-of-living crisis. They caused this by prolonging their low-interest rate policy, which has resulted in inflation, and by reacting too slowly with rapid and excessive multiple rate hikes which have now triggered systemic failures in every sector of our economy”.
Dr Gewolb has criticised the BoE’s decision to now hold interest rates at 5.25%, stating that it’s time for the Bank to take action to avoid further negative impacts. Along with noted economist Catherine McBride and other experts, is calling for the Bank to reduce interest rates immediately and introduce reforms through his Campaign for Fair Finance ™.
Governor Andrew Bailey has emphasised the ongoing fight against inflation, challenging financial markets that have already bet on rate cuts. Despite warnings from the Bank, traders have forecast interest rates of 4% by the end of next year, as reported by The Times. Deputy Governor Ben Broadbent has stated that more evidence is needed to conclude that the price index is in a clear downtrend. He highlighted the disparities in labour market measures, as the Office for National Statistics (ONS) shifted to an experimental series method to calculate employment data due to lower responses.
“Blaming wage growth for inflation is misleading,” says Dr Gewolb, “It also increases the risk of economic stagnation but is one of the three points used to determine how much additional monetary policy tightening is needed, the other two being slack in the labour market and services inflation”.
Through his numerous expert comments, as well as his economic analyses for Business Leader, Dr Gewolb said this would happen over a year ago; “What I have been writing and saying for over a year now is that our cost/push, mainly non-consumer driven inflation was always expected to decrease on its own. By hiking interest rates quickly and continuously there was always a real risk that it BoE would overshoot its target because the impact of most interest rate increases is yet to be felt, and the true extent of the downturn that they have caused has not yet affected us.”
The Bank has mismanaged this inflation cycle from the start, as Gewolb explains, “causing the biggest mortgage crisis since the ‘80s. Rate rises have crippled millions of British consumers and thousands of businesses, causing grave problems in the mortgage, rental, and property markets, cost-push inflation always falls by itself, just as food and energy prices are dropping now and just as it did in 2009 to 2012 when the BoE left interest rates unchanged”.
The recent powerful House of Lords Economic Affairs Committee report damning the Bank of England over its inadequate inflation forecasts and handling, while urging Parliament rein in the Bank’s independence, and take a more active role in holding Bank executives accountable and appointing them, is the latest in a series of official findings on the risk to financial stability from recent UK central-banking practises.
“The Bank needs to be able to react quickly and appropriately when deciding on monetary policy, and taking care of the potential impact on financial stability when setting rates,” adds Gewolb.
You can read Roger Gewolb’s previous analysis of the Bank Of England monetary policy in his Business Leader columns here.