Home Money ALEX BRUMMER: Bank of England must bolster growth

ALEX BRUMMER: Bank of England must bolster growth

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Confidence: Supporting an emerging recovery is critical to productivity, production and prosperity



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Anyone expecting fireworks and a respite from high borrowing costs at next week’s Bank of England interest rate meeting will likely be disappointed.

The battle against inflation is being won, but market rates have opposed an early reduction in borrowing costs. The Federal Reserve’s failure to control producer and consumer prices in the United States will not encourage boldness.

An independent bank does not have to move at the same pace as the United States and makes its own decisions.

It is often forgotten that Governor Andrew Bailey, although a latecomer, was the first to act when it came to ending the era of super low interest rates in December 2021.

All future UK consumer price indicators are heading in the right direction. Large increases in food costs have stopped, although concerns remain about the impacts of rain and flooding on rapeseed oil and other crops.

Confidence: Supporting an emerging recovery is critical to productivity, production and prosperity

Confidence: Supporting an emerging recovery is critical to productivity, production and prosperity

Wage agreements, at the 5 percent level since early 2024, have been moderating, but there are concerns about the 10 percent increase in the minimum wage in April. What changes the rules of the game is energy prices, which fall from the consumer price index.

HSBC analysts, among others, maintain that the headline rate could fall to 1.2 percent in May.

There will be concern, as in the United States, that the lower cost of living is temporary and prices could rise again.

Both fiscal policy and monetary creation have been more expansive on the other side of the Atlantic than in Britain.

Forecasters project a repeat of the three-way split seen at the February session of the Monetary Policy Committee, when six members voted for hold, two for higher rates and one – the esteemed LSE economist Swati Dhingra – opted for a cut. Britain quickly emerged from the technical recession late last year, which could in any case be lifted by data revisions.

Critical to productivity, production and prosperity is supporting an emerging recovery.

Monetary policy, high interest rates, and the dismantling of quantitative easing (money printing) all have long lead times.

The MPC should abandon its misguided caution, implement an immediate cut in the current 5.25 per cent bank rate and put muscle behind the recovery.

Italian work

Margherita Della Valle has been busy since taking the helm of Vodafone 14 months ago.

In quick succession, it has freed itself from Europe’s highly competitive southern fringe of Spain and Italy.

The clean sale of the Italian unit to Swisscom for £6.8bn comes as something of a surprise amid speculation about a more complex Italian deal, which would require antitrust approval.

Vodafone long ago gave up its ambition to be Britain’s global mobile champion, having been bullied by investors into pulling out of a loss-making operation in Japan and a minority stake in the United States.

Short-termism triumphed over the more distant prospect of enormous riches as the data revolution produced new streams of income. The falling share price has led successive Voda bosses to sell their way out of trouble rather than make the effort to turn around low-octane assets.

The task now is to double down on the UK if regulators can be persuaded to approve the proposed merger with Three.

Della Valle must also restart a clearly mediocre German operation and make the most of Africa.

Focus will help. But long-suffering shareholders, who have seen a legacy betrayed, should not count on much change.

Technological confidence

The holders of the Scottish Mortgage Investment Trust (SMIT) have had a whirlwind journey. The Baillie Gifford fund grew to become Britain’s largest investment trust by making bold bets on Silicon Valley, generating stupendous returns.

Maintaining momentum is difficult, even though next-generation technology like Nvidia and Elon Musk’s Space X are in the pipeline. SMIT is trying to control the discount to asset values ​​with a £1bn buyback.

Elegant. But what happened to the spirit of adventure?

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