Belated pledge by Bailey: Bank of England boss should tackle the issues at hand… and not worry about the history books, says ALEX BRUMMER
So now Bank of England Governor Andrew Bailey is having his Mario Draghi moment.
The Bank says the interest rate-setting Monetary Policy Committee (MPC) ‘will not hesitate to change interest rates as much as is needed to return inflation to the 2 per cent target’.
Since every fall in the pound adds to the price of imports, Bailey and his team seek to underline they are on the case. The Treasury is helping to shore up confidence too.
Ineffective: Under Andrew Bailey’s stewardship the Bank of England has never missed the opportunity to miss an opportunity
Chancellor Kwasi Kwarteng has asked the Office for Budget Responsibility (OBR) to provide some scaffolding for a fiscal plan to be unveiled on November 23.
Whether or not the Bank and Treasury working in tandem will be enough to convince the market that this is not 1976, and the UK is not joining the ranks of the emerging markets, is the unanswered question.
Events of the last few days, sterling skidding on the foreign exchanges and the surge in gilt yields, need unpacking.
The reality is that under Bailey’s stewardship the Bank has never missed the opportunity to miss an opportunity.
The Governor was impressive when he took charge of Threadneedle Street in March 2020, recognising the dangers of coronavirus to markets, business and jobs.
That sure-footed start has dissipated. On Thursday, at its September meeting, the MPC had every opportunity to put a floor under the pound and stabilise gilt yields.
The Old Lady’s more elderly sister, the Riksbank in Sweden, had earlier lifted rates by a full percentage point and the Federal Reserve had hiked US rates by three-quarters of a point.
The Bank of England’s response? A flaccid half-point rise on a split decision, with three hawks wanting more.
If the action of the other central banks, the surge in the almighty dollar and sterling’s weakness were not enough of a signal to Bailey to do what it takes, it is hard to know why.
The potential cost of the energy bailouts fully was known. The Chancellor’s biggest tax changes – the roll-back of national insurance and corporation taxes rises – have been visible for weeks.
The MPC should have been given some inkling of loosening of fiscal policy by the Treasury’s observer at the Bank.
It would have been far better for the Bank to focus on bank rate rather than chucking an extra £8.7billion of gilts back into a market already likely to struggle with excess issuance.
One other bit of misinformation filling the airwaves needs to be challenged. Yes, in the rush to make policy decisions before the party conferences, there was no OBR report on the Truss/Kwarteng plan.
Nevertheless, as happened in Covid (the energy emergency is the equivalent of that) and when earlier energy help was unsheathed this year, the Treasury did provide meticulous detail.
In Kwarteng’s ‘Growth Plan’ blue book the estimated costings right up to 2026-27 were provided. So the idea that the Government was flying blind is poppycock.
Neither the Treasury, which lost its top civil servant Tom Scholar, nor the Bank of England are happy ships. Bailey is fearful that if it all goes horribly wrong and there is a full-blown monetary/economic crisis he is being set up to be the scapegoat.
Better the focus on dealing decisively with the issues before him than worrying about the history books.
The departure of Alan Jope next year as Unilever chief executive has been on the cards since the failed £50billion bid for GSK’s healthcare arm Haleon leaked in January.
Whatever or not the merits of the bid (GSK should have taken the money and run) someone, somewhere was determined to undermine his credibility.
It is to Jope’s credit that he stoically reorganised his business and has focused on organically growing promising new health and beauty brands in spite of the slings and arrows from Terry Smith of Fundsmith and US activist Nelson Peltz.
The latter is never a person to be trusted when it comes to totemic British-branded companies.
Jope has never forgotten Unilever’s antecedents and stood up and been counted in the face of the Ben & Jerry’s board’s efforts to ostracise Unilever over the sale of ice cream in the West Bank.
He demonstrated moral leadership in the face of heavy fire.