It is the last for the Bank’s chief economist Andy Haldane
For the first time in nearly two years, inflation went beyond its target, putting pressure on the Bank of England to increase interest rates.
Consumer price inflation (CPI) jumped from 1.5% in April to 2.1% in May as the cost of fuel, clothes and dining out all surged.
The UK central bank, headed up by Andrew Bailey, is facing increasing pressure from City experts to bring the issue under control, by easing quantitative easing measures and/or raising the interest rate.
The Bank’s goal is to keep inflation at 2% however it failed to do so in May as the pandemic made an impact.
The Bank of England’s meeting of its rate-setting monetary policy committee on 24 June will be closely watched. Particularly as it is the last for the Bank’s chief economist, Andy Haldane, a prominent hawk who has warned of the growing dangers from inflation.
Laith Khalaf, financial analyst at AJ Bell, comments:
“Inflation is rising and unemployment is falling, but the Bank of England isn’t going to do anything about raising interest rates until it’s sure these aren’t just transitory factors emanating from an economy that’s gone from red to green. Markets will therefore be watching for any change in rhetoric rather than concrete action, particularly following the latest hawkish shift in interest rate expectations from the US central bank. We’re now beginning to reach that topsy turvy part of the cycle where good news becomes bad news, because markets worry that positive economic signals will hasten the withdrawal of central bank liquidity,” Khalaf said.
“The forthcoming meeting will be Chief Economist Haldane’s last, before he leaves the Bank of England after a 32 year career at Threadneedle Street. Haldane has been a consensual member of the MPC in his seven year stint on the committee, going against the majority decision on interest rates only once, in June 2018, when he voted for a 0.25% hike. Just a month later, the MPC voted unanimously to raise rates, so this was hardly a controversial stand.”
“Haldane has courted some controversy off the pitch, when in 2016 he said he didn’t understand pensions, and said financial advisers had “no clue” either. Quite clearly a feather ruffler in certain quarters. As many pointed out at the time, Haldane enjoys the benefits of being a member of public service defined benefit scheme, which guarantees a retirement income, and means pension planning probably isn’t quite as pressing a matter as it is for the majority of people. However he was absolutely right to point out at the same time how the lack of supply in the housing market would lead to a property price boom, a phenomenon which continues apace today, aided by low interest rates and government policies designed to incentivise and facilitate house purchases.”