Bank of england

A week that started with the Vickers review on banking has closed without another national explosion of banker-bashing. Thank God. Beating up on the banks has lasted almost three years now, and it’s blinding us to the real causes of the financial crisis. The banks are the perfect alibi: blaming them gets everyone off the hook. How, asks Gordon Brown, was a mere Prime Minister to know that banks were doing such fiendishly complicated things? How, asks George Osborne, was an opposition expected to detect what the government could not? How, asks Mervyn King, was the Bank of England governor supposed to know that these bankers had been so wicked?

Is the inflation panic over? After rising for five consecutive months, CPI inflation went down by a 0.4 percentage points in March, to 4.0 per cent, taking the City by surprise. RPI inflation also went down, by 0.2 percentage points. The numbercrunchers at the Office for National Statistics put it down, largely, to a fall in food and drink prices. The cost of fruit is 2.7 per cent down on last March. The cost of bread and cereals, 2.6 per cent. Yet we shouldn’t get ahead of ourselves. While this will certainly reduce the short-term pressure on the Bank to increase rates — as well as on the nation’s pocketbooks

Unwelcome news for George Osborne: he will tomorrow present his Budget against a backdrop of the highest inflation for 20 years. The RPI index — what the nation called “inflation” until Brown changed the definition — is 5.5 per cent. It hasn’t been this bad since the aftermath of the ERM crisis, an unhappy comparison for the Tories. The CPI index is up to 4.4 per. And those who deploy the usual arguments about global food prices are spiking might wonder: why is Britain now even worse off than Greece?     Even the Zimbabwean media is laughing at us (their inflation is now considerably lower than ours). It’s shocking,

Today’s decision to leave base rates at an emergency 0.5 per cent — the lowest since the Bank of England was founded in 1694 — shows how Britain is running out of options. Not even Mervyn King would deny that Britain has an inflation problem: global prices may be up, but the UK seems to have been hit worse than almost any major economy, as I blogged yesterday. With food prices up by 6.3 per cent and CPI inflation by 4.1 per cent, what’s happening to prices? The below graph, again out today from a FTSE350 survey, suggests that pay is up by just 0.5 per cent in the private

Now that today’s inflation figures are up, to a predictable and predicted 4.0 percent on CPI and 5.2 percent on RPI, we can expect the usual response. Nothing from the government (even though the declining standard of living will eclipse cuts as the no.1 problem of 2011); plenty of shocked news stories; and, then, the round of commentators saying that Mervyn King should “hold his nerve,” and not increase the absurdly low base rates of 0.5 percent. Inflation is temporary, he says, and should be okay again this time next year (that’s what he said about the start of 2011). The Spectator does not have much company in finding fault

If Mervyn King and his team are trying to deal with Britain’s debt crisis by letting inflation rip, I do wish they would just say so – rather than go through this monthly farce. Yet again, base rates have been left at an absurd 0.5 per cent, in an economy expected to grow by a full 2 percent this year but with inflation at 3.3 percent or 4.8 percent depending on how you measure it. Petrol prices are bad, but now they are matched with soaring prices elsewhere – from train travel to groceries. Here’s a list of some price rises confronting shoppers:   Add Osborne’s VAT rise to non-food

The week began with grim projections about petrol prices, and has been coloured by the twin topics of tax and inflation since. So, a decent opportunity to look back on the fuel protests of 2000, in the latest shot from the Spectator archives. Here’s a piece from the time, by Coffee House regular, and Spectator theatre critic, Lloyd Evans:   Do you want a smack in the mouth?, Lloyd Evans, The Spectator, 16 September 2000 As I write this, the gravest crisis in our island story is unfolding before my eyes. The great four-star emergency of September 2000. Where it will lead, no one can tell. Frequent bulletins from BBC

Even governors can be wrong. The Bank of England’s quarterly inflation report is expected to downgrade its original growth forecasts and predict a sharp increase in inflation, albeit one that peaks this year and returns to the target rate by 2012. A spike in inflation is scarcely surprising given the planned VAT rise, and the Bank’s original growth forecasts were, like Alistair Darling’s forecasts, absurdly over optimistic – predicting 3.4 percent growth next year and 3.6 percent the year after. The Bank’s revisions needn’t trouble George Osborne, whose forecasts of 2.3 percent growth next year and 2.8 percent in 2012 were drawn from the OBR. However, the OBR may have