Inflation

The Governor of the Bank of England, Andrew Bailey, is a loyal and well-intentioned public servant in a role that, by its nature, attracts constant blame and hindsight judgment. Liz Truss is a spectacularly failed 44-day prime minister with a book to sell. So when Truss says Bailey should have been sacked for his part in her downfall –when the Bank intervened to prevent a pension fund crisis after her chancellor Kwasi Kwarteng’s radical mini-Budget of September 2022 – and that he should be sacked anyway for being part of a Keynesian economic Establishment, with the Treasury and the Office for Budget Responsibility, that has delivered nothing but stagnation, my

Argentina has spent most of its 200-year history in deficit; no other country currently owes the International Monetary Fund a greater sum of money. The new finance minister, who entered government with President Javier Milei earlier this month, has been stark in making the point: ‘Out of the last 123 years, Argentina ran a fiscal deficit in 113… we have come to solve the addiction to fiscal deficits.’  Milei’s government is wasting little time carrying out what it calls ‘shock therapy’. The official value of the peso, Argentina’s currency, has been halved against the US dollar. Why might a government want to weaken its own currency, pushing up the price

The government’s objective to ‘halve inflation’ by the end of the year seems to be back on track – for now. Last week’s interest rate hike was delivered with an updated inflation forecast from the Bank of England, showing the rate slowing to 4.7 per cent by the end of the year, just below Rishi Sunak’s target. The better-than-expected fall in the headline rate last month has forecasters thinking things are finally moving in the right direction. As Ross Clark reports on Coffee House, Capital Economics is expecting another major fall in the rate next week – down to 6.9 per cent on the year – when July’s figures are released.

Has food price inflation finally peaked? Figures released by the British Retail Consortium (BRC) this morning reveal that food prices were up 15.4 per cent in the past 12 months, down from 15.7 per cent in the year to April. Last week’s figures from the Office of National Statistics also showed a small fall, from 19.2 per cent in March to 19.1 per cent to April. The BRC’s methodology is different from the ONS’s, not only in that it tends to produce slightly lower figures but that it also runs slightly ahead. The inflation story has subtly changed, from being one led by energy prices to being dominated by food

It has dawned on the government that last week’s mini-Budget might have been a bit too one-sided: £70 billion worth of extra borrowing and not a single mention of spending cuts or efficiency gains has seen borrowing costs spike (up by 0.3 per cent just today). As James Forsyth reports on Coffee House, this afternoon’s announcement that a ‘medium term fiscal plan’ will be announced next month is an attempt by the Treasury to reassure markets – and convince them that fiscal responsibility has not totally disappeared from this government’s agenda. Emphasis is being placed on previous promises to make sure debt falls as a percentage of GDP in the

Rising interest rates is a key pillar of Trussonomics. Liz Truss herself has always stopped short of saying this explicitly, pointing fingers instead at the Bank of England for its failure to curb spiralling inflation. But the economists advising her have made clear, in no uncertain terms, that they think interest rates have been too low for too long.  Right from the start of her leadership campaign, Truss was far more vocal about her criticisms of the Bank; a point made even clearer once she entered No. 10 and her Chancellor Kwasi Kwarteng set up bi-weekly meetings with the Bank’s governor Andrew Bailey. With this new pressure being applied on the

In the end, it could have been worse. The Federal Reserve might have followed Sweden’s lead, with a whole one point rise in interest rates, or it could have even decided to short-circuit the whole process and go straight for a 1.5 per cent increase. Instead, it opted for the safer course, imposing a 0.75 per cent increase in rates much as the market expected. Even so, it made one thing absolutely clear. It is not going to let up in its battle to bring inflation back under control – and the rest of the world will have no option but to follow its lead. The markets were primed for