HOUSEHOLDERS will pay a heavy price for the Bank of England if Andrew Bailey fails to keep inflation under control.
Some people could lose their roofs if he raises rates as expected today by 0.5% to 5%.
Mortgage payments jumped even higher, to more than 6% – three times more than a year ago – accounting for almost half of some families’ income.
Inflation is holding back pensioners and others on fixed incomes as food prices continue to stubbornly rise.
Hundreds of thousands of middle-income earners in their 30s and 40s face a combination of more expensive mortgages and rising costs of raising a family.
Much of this misery could have been avoided if Bailey, who was nicknamed “The Plank of England” by City critics, had heeded the nagging warnings from economists, including even his most senior bank advisor.
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The inflation scourge has many causes, including the Covid pandemic and the impact of the war in Ukraine on energy bills.
But even before these disasters hit, Bailey was encouraged to stop printing money on a large scale in the form of “quantitative easing.”
This policy, known as QE – or “money for nothing, the rest is free” – ignited the flames of what has turned into a deadly wage price spiral, with pay for followers. chase and promote the cost of living.
No one, at least Bailey, can claim that they did not anticipate this.
His own chief economist Andy Haldane – considered by many to be the better candidate for the job when Bailey was appointed – quit exactly two years ago after his warnings were ignored. .
In a farewell shot, he predicted the bank would be forced to take a dangerous turn as the cost of living skyrocketed out of control.
Bailey refused to act, failing in his duty as head of Britain’s independent central bank to fix inflation at 2% or below 2% – or explain why. why not send it to the Minister of Finance in writing.
We can smell burning rubber right now.
Blow up the fire
IFS economist Tom Wernham said households faced a “delicious” increase.
“Many families bought homes with large mortgages when interest rates were very low.
“When people’s fixed-term offers end, they face a much higher price.
“The increase will come as a severe shock.”
To be fair, Bailey isn’t the only villain.
The Bank of England’s entire board is to blame for what observers in the City and Westminster consider “group thinking” – a staggering lack of imagination.
The bank is another specimen of The Blob, crippled by bureaucratic inertia.
Mr. Bailey, who has yet to be knighted or confoundedly awarded to such roles, was a shock appointment in March 2020.
It comes despite fierce criticism over his failure as head of the Financial Conduct Authority to protect savers in the London giant’s £236million collapse Capital & Finance.
He was criticized for his “lack of judgment” in trying to wriggle and blame others, traits many believe he brought with him when he went to the bank.
Mervyn King, a respected former governor of the Bank of England, recently accused Bailey of failing to do his job.
He criticized QE’s money printing and “serious mistakes made by the bank in not acting sooner”.
He dismissed Bailey’s claim that 80% of inflation was caused by external forces like Ukraine.
Until now Bailey has steadfastly rejected all criticism, until finally succumbing to criticism from MPs this month and admitting that his economists had forecast inflation. Completely wrong.
He has promised to investigate and is now under pressure to speed things up before further disasters strike.
Former Cabinet Secretary Sir Jacob Rees Mogg said: “It is not surprising that people realize the Bank of England has screwed up. It is completely complacent about inflation.
“It would have had to raise rates more than necessary, if it were to do its job.”
However, despite his disastrous failures, Bailey was still fireproof.
Under rules set out by Labor Prime Minister Gordon Brown, the Bank of England is independent of the government.
Prime Minister and former Prime Minister Rishi Sunak is known to be very frustrated by the bank’s failures but nothing can be done.
Ministers blamed Bailey for destroying their last slim hopes of a surprise election victory.
“People seeing their mortgage payments triple within a year wouldn’t blame the Bank of England,” a senior Cabinet minister said last night.
“They will blame us.”