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Andrew Bailey has had little to celebrate lately. He has suffered the slings and arrows of Bernanke’s scathing report on the Bank of England’s forecasts and the indiscriminate fire of former prime minister Liz Truss.
Amid the furore surrounding the governor of the Bank of England, his eyebrows can still work their magic.
At last week’s finance sessions in Washington, Bailey made clear that the UK is likely to plow its own furrow when it comes to setting interest rates.
Pressures on the cost of living in Britain have been created by supply-side factors, particularly energy costs following Russia’s war with Ukraine. In contrast, in the United States, a buoyant economy slowed progress in controlling inflation.
This should mean Britain could beat the US Federal Reserve to cutting rates.
Return point? Bank of England Governor Andrew Bailey was clear that the UK is likely to plow its own furrow when it comes to interest rates.
The markets have assimilated the message and the prospects for reducing interest rates have taken a leap forward in recent operations.
Markets are pointing to a first cut in British rates from 5.25 percent by a quarter of a percentage point at their August meeting and two base rate cuts by the end of the year.
Two-year bond yields have also fallen. Both homeowners with a UK vat number and UK businesses have something to look forward to.
The actions have been buoyed by (so far) no escalation in violence between Israel and Iran, although the conflagration in Gaza continues.
Bailey’s next battle will be on the Monetary Policy Committee. As governor, it is up to him to set the tone at meetings of the interest rate-setting committee.
He could probably persuade Bank members, but outside hawks, including Jonathan Haskel of Imperial College London, could present a more difficult obstacle.
Not before time is it recognized that it is time to remove the foot from the monetary brakes.
High notes
Who would have thought: a bidding war for Merck Mercuriadis’ Hipgnosis song fund.
As the group struggled for survival earlier this year, it seemed like some sort of runoff was the most likely outcome.
Hipgnosis is among my ‘hobby’ stock portfolio, which has gone disastrously wrong. The Chocolat Hotel was saved from humiliation thanks to an opportunistic acquisition by the secretive Mars family. The Brighton Pier Company, bought for 100p, is now trading at less than half that.
Mercuriadis, a former roadie, had a great story to tell when he founded Hipgnosis. His long career in the world of popular music gave him access to great performers, and his songbooks offered him a new kind of asset.
My son Justin, an academic and founder of the website VietnamWarSongs, which catalogs and collects protest music, has intensified my interest in songbooks.
Hipgnosis was at the forefront of signing artists such as Shakira, Jay-Z and Justin Bieber.
As the space became more crowded and industry giants recognized that royalties had value, the price of new signings skyrocketed. Mercuriadis found himself paying higher and higher prices for songbooks and the economy collapsed.
It also faced conflict of interest claims over its relationship with private equity firm Blackstone, with Hipgnosis Song Management acting as an advisor to the group with an option to buy the entire songbook from the original fund.
The arrival of Blackstone, competing with Concord Chorus, must be good for shareholders. The chances of the bidding war providing a profitable exit route from a fund once valued at 150 pence a share are unlikely.
However, Blackstone’s offer of $1.24 (just over 100 pence) per share in cash provides a decent exit route. It would be great if Concord came back with a counterattack or if one of the industry giants saw an opportunity.
An honorable escape route is the best this hobby owner can hope for.
Quick post
The Royal Mail owner’s effort to reject an unwanted bid from Czech billionaire Daniel Kretinsky calling for a swift response from regulator Ofcom to proposed delivery reforms could be a double-edged sword.
If proposals for an expensive, premium fast delivery service and a slow second class get the go-ahead, then parent company International Delivery Services could become an even more attractive bid target.
The Government needs to make it known: the post office is not for sale.