Every year, I get heavily involved in the party conference season, speaking at fringe meetings, gossiping with MPs and ministers and generally indulging my appetite for political intrigue.
Then, having made my annual visit to the ‘Westminster bubble’ – albeit away from Westminster – I feel an overwhelming urge to restate what I see as a universal truth.
Ooohhh – events on the Bank of England’s Monetary Policy Committee are getting interesting. Earlier this month, the MPC kept rates on hold at an all-time record low of 0.25pc.
We learnt last Thursday, though, that the decision was strikingly close – 5 votes to 3, rather than the predicted 7 to 1. External members Ian McCafferty and Michael Saunders joined Kristin Forbes, who has been backing a rate rise for several months. They were right to do so – not least as the admirable Forbes is about to leave the MPC.
Caution is warranted,” said Gertjan Vlieghe last week, as he argued now isn’t the time to raise interest rates. I’d say Vlieghe, a member of the Bank of England’s Monetary Policy Committee, should reconsider.
The UK is heading for a downturn, believes the half-Belgian economist, as the fall in sterling after last summer’s Brexit vote pushes up inflation, so squeezing household finances. “The consumer slowdown, which initially didn’t materialize, now appears to be under way,” said Vlieghe during a speech in London, arguing rates should stay put at an ultra-low 0.25pc.
The Bank of England has dramatically upgraded its UK growth predictions. Just like HM Treasury, the International Monetary Fund and all those other official bodies that took an astonishingly pessimistic view of Brexit, the “Old Lady of Threadneedle Street” has somewhat changed her tune.
Ahead of last June’s referendum, Bank Governor Mark Carney warned of “a technical recession” – two consecutive quarters of shrinking GDP – if we voted to leave the European Union. Even in August, as the economy remained buoyant despite the Brexit result, the Bank was forecasting growth of just 0.8pc in 2017.
It’s been another bad week for “Remoaners”. Those who warned the UK economy would nosedive if we voted for Brexit faced another wave of broadly favorable data.
Since the UK’s historic referendum in June, the widely-threatened Brexageddon hasn’t happened. On the contrary, consumer confidence has rebounded, retail sales are up and the housing market has remained firm – pleasing homeowners while further exasperating first-time buyers.
So much for the end-of-the-world brigade, who warned the UK economy would collapse if we chose to leave the European Union. Almost two months on from our historic Leave vote, we’re showered in encouraging economic news.
Ahead of the referendum, despite endlessly reported corporate “Brexit fears”, we now know British companies kept hiring. The UK’s employment rate reached a record 74.5pc during the three months to June, according to official data released last week. Some 31.8m people were in work – 172,000 more than the previous quarter. Unemployment fell to 4.9pc of the workforce, an 11-year low.
“To retain credibility, it’s important central banks don’t claim to know more than they in fact do”. So said Former Bank of England Governor Baron (Mervyn) King in his recently published book, The End of Alchemy. Does King’s successor agree? In August 2013, a freshly-appointed Mark Carney, under his new “forward guidance” policy, declared the Bank would finally raise interest rates when UK unemployment, then 7.8pc, fell below 7pc.
Almost three years on, after faster than expected growth, unemployment has fallen to 5.1pc, yet the bank rate remain at 0.5pc – where its been since being slashed in the aftermath of the 2008 Lehman Brothers collapse.