The world of central banking harbours some surprisingly colourful colloquialisms. “Taking away the punch bowl”; “helicopter money”; “Black swan events”; and, the one lately levelled at the governor of the Bank of England, Andrew Bailey last week, “unreliable boyfriend”. A less apt description of the no-doubt uxorious Bailey, 62, could scarcely be imagined, but it referred to his uncertain intentions for interest rates rather than his wife, the distinguished American academic Cheryl Schonhardt-Bailey.
You see, the markets thought that Bailey and his colleagues on the Bank’s monetary policy committee would raise interest rates from their all-time low of 0.1 per cent this week. Just a little token would have been sufficient, 0.25 per cent say, just to show willing, and keep faith. They – players in the markets – assumed there’d be such a move by various hints Bailey had dropped in the preceding weeks, the kind of Delphic formulations where subclauses and contingent cautions are parsed and parsed again by journalists and analysts. Maybe he led them on, maybe they took things the wrong way, but he seemed to have disappointed them a little. He had been unreliable.
Bailey’s disarming excuse was that he and his colleagues really didn’t know what was going on, which probably inspired more confidence than you might think. Or not. The furlough scheme is ending, and they cannot say what impact it will have on labour shortages or wages or demand across the economy. As the governor pointed out, pushing rates higher won’t deliver more gas. It’s too early to act yet, it seems, even though inflation is headed towards 5 per cent, and Bailey has been saying much the same thing about pushing rates higher to choke off a nascent inflationary spiral since around March – “yes, but not yet”.
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies