When I presented at the last Scrutton Bland Budget Breakfast I explained why the Chancellor’s inflation data (6%) was woefully out (see https://youtu.be/F1aeTxCxNlk?t=540).
They are now saying 11%.
Let’s get straight to the point. Half a trillion pounds was printed by the Bank of England – a policy choice to respond to Covid. A GCSE economist could tell you that so-called “quantitative easing” causes inflation (more of something means that it is worth less).
A panicky bank put in too much money too quickly.
Growth isn’t happening. FTSE indices reacted badly to an unexpected 0.3 per cent drop in UK GDP for April. And as the Bank of England tries to claw-back its tattered credibility with this run of rate rises, investors will be jumpier still until they can sense “peak inflation”.
On top of that, I’ve long felt that unemployment data is fudged: there are more than five million people “missing” from the workforce (most of those on out-of-work benefits are not included in unemployment figures because they are not seeking work).
The problem is that there is currently no sense of when “peak inflation” will be. The market needs competent government and an authoritative and credible central bank to predict that. Plus the real unemployment factors are still hidden. So buckle up until at least 2024 – it’s going to take at least that long for all this to come out in the wash.