The big criticism of the Bank of England, since it began normalizing interest rates two years ago, has been “groupthink.”
The Bank’s think tank saw that inflation was coming too late.
When it was finally recognized that the UK had a real cost of living problem, the Monetary Policy Committee (MPC) tasked with setting interest rates went ahead with 14 increases to the current level of 5, 25 percent.
MPC dissidents argued that monetary policy needs time to work, but they were given short shrift.
Fascinatingly, the Bank’s chief economist, Huw Pill, has begun to tone down his rhetoric. At the very least, he believes UK rates have peaked.
Return point? There is a widespread understanding that when the Bank of England’s October data is released next Tuesday, headline inflation will come down with a jolt.
On Tuesday he was absolutely clear when he stated that “it was not unreasonable” to think that rates could begin to fall next summer.
In his last intervention, Pill acknowledged that the Bank would need to make its policy more flexible if the outlook changes and the economy slows.
The tone of his comments was different from that of Governor Andrew Bailey, who maintains that it is “really too early” to talk about a rate cut.
Consumer prices of 6.7 percent are still more than three times the Bank’s target of 2 percent, but there is a widespread understanding that when October data is released next Tuesday, headline inflation will come down with a jolt. .
There is expected to be an adjustment to the energy price cap, food costs are moderating and producer prices have fallen into negative territory.
The last time a rift opened between Bailey and his chief economist was in 2021. Andy Haldane argued loudly, as early as spring 2021, that the inflation genie was out of the bottle.
He wanted an earlier rise in interest rates and before resigning he dissented by voting against another round of quantitative easing.
Clearly, the divide between Pill and Bailey is less pronounced. However, Pill’s economic credentials, which include a PhD from Stanford University and stints at the European Central Bank and Goldman Sachs, cannot be discounted.
It will be interesting to see if Pill decides to break with the group and vote for a cut. Certainly, geopolitical uncertainty and slow production in China point to an uncertain outlook.
The latest Reuters poll of economists found that 82 per cent think UK rates have peaked.
More than a third expect the first interest rate cut in the second quarter of 2024, ahead of Pill’s suggestion in August. The tide is turning against hardliners.
diet pill
No wonder shareholders are reluctant to see Pascal Soriot step back as AstraZeneca CEO.
The Australian-French boss continues to defy expectations. Astra projects that annual revenue will rise below the teens and profits will be even higher.
AZ’s suite of oncology treatments provides a lifeline to cancer patients around the world.
The market does not seem overly concerned about the damage caused to AZ by legal actions brought by families who allegedly suffered life-changing blood clots as a result of taking the Oxford vaccine during the pandemic.
There is peace of mind thanks to government compensation. One of the reasons Soriot is so well-liked is his willingness to make bold decisions.
He accepted Oxford’s jab even though this did not play to AZ’s historical strengths.
It is correcting the company’s absence from the weight loss market with a £1.74bn deal with China’s Eccogene to develop a pill to compete with the Wegovy injection developed by Novo Nordisk. Early data from Eccogene is seen as promising.
Soriot recently indicated his willingness to serve another five years. If new president Michel Demare puts in place a convincing succession plan, don’t expect him to stay that long.
Picasso Peak
Shortly before the stock market crash of 1987, Tokyo-based insurer Sompo Holdings paid a record £33m for Vincent van Gogh’s Sunflowers.
The sale of the work (now disputed by its original German Jewish owners) was seen at the time as the peak of Japanese exuberance before the country’s lost decade.
This week in New York, Picasso’s 1932 painting Femme A La Montre sold at Sotheby’s for £114 million, making it the most valuable piece sold at auction in 2023. It’s time to pull up the net. security.
