Bank Of England Debacle: 10% Inflation, Recession Risk, Dissent
The Bank of England celebrated 25 years of independence by hiking rates 25bps on Thursday.
It was the fourth consecutive hike and brought Bank Rate to the highest of the post-financial crisis era (figure below). The vote was 6-3, with the dissenters favoring a 50bps move.
The new statement echoed the Fed in citing the combination of the war in Ukraine and lockdowns in China as factors that could prolong supply disruptions, weigh on growth and exacerbate inflation.
"Global inflationary press
The model shows that keeping rates at 1% would kill 10% inflation in 2 years. Totally reasonable!
Aren’t most UK mortgages floating rate?
Naive question – what’s driving the difference in inflation outcome between the US, the UK and mainland Europe?
We are all exposed to Chinese lockdowns (to varying degrees?), to the war in Ukraine (to varying degrees?), though we all had somewhat differently generous fiscal stimulus during COVID (my understanding is that the US >> EU response ; no idea about the UK one).
Is this made worse by Brexit by any chance?
Random internet sites say Germany had 7.3% CPI recently, so basically a more austere country also has inflation (because Pandemic Supply Chain, War in Ukraine)… Manufactured foods and oil…
Which makes me wonder if anyone in England is rethinking the narrowly “approved” Brexit (context: Russia Report)?
Or maybe their independent economy and trade deals will allow them to flourish without the anchor of a free trade European market.