I'm not saying I don't like my job, but I think I'd quite fancy sitting on the Bank of England's Monetary Policy Committee (MPC) . Not for the money, of course – though a total compensation package of £163,700 per annum sounds decent. Nor even because I take an amateur's interest in macroeconomics. But, bluntly, because I like the idea of my public statements moving markets.
Anyway, the MPC meets tomorrow to determine, amongst other things, interest rates. With inflation sitting pretty at the Bank's target of 2 per cent, you'd think a rate cut would be a slam dunk. But things are never that straightforward. As business editor Jonathan Prynn notes in his column, the markets are fairly evenly divided on whether we might see a first rate cut since March 2020.
The reason for scepticism is that, despite a healthy top line inflation figure, things are little murkier under the bonnet. First, core inflation (that is, with more volatile inputs such as energy and food stripped out) remains at 3.5 per cent in the 12 months to June 2024. While services inflation is at an uncomfortable 5.7 per cent.
Second, the government has injected the economy with what Jonathan calls "another adrenaline hit of spending power" in the guise of well-above inflation pay awards for public sector workers. And third, this follows a near-10 per cent rise in the minimum wage back in the spring, which is still working its way through the system.
Other things to worry about (though, only just back from holiday, Jonathan looked intensely relaxed this morning) include the spectre of firmer food inflation following terrible weather earlier in the year, energy bills rising again as autumn arrives and even robust economic growth – at least by recent standards. No lesser authority than former chancellor Philip Hammond popped up on Sky News today to predict a hold steady decision (and have a go at Rishi Sunak for calling a July election).
There is a strong case to be made that this subject would have been better for tomorrow's newsletter, when we'd actually know the MPC's decision. But in the interest of full disclosure, I couldn't think of anything else to write about. In a very real sense, I have borrowed from tomorrow for an easier today. In which case, I suppose ought to hope for a rates cut.
Still, whatever happens on Thursday – short of some sort of exogenous shock – we are clearly in the foothills of a loosening cycle. Welcome news for any new government, particularly one which likes to emphasise its uniquely challenging inheritance.
