The Bank of England – John Redwood’s diary

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I think the bank was right not to raise interest rates this week pending more knowledge of the labor market and wage increases now that the leave plan is over. I am against raising rates all the time, the bank creates more money to buy bonds to keep rates low. It would be a contradictory policy.

I asked to stop creating more money, the bank has created enough. Savings are high, so many people could afford to spend more if they want to. The liquidity and capital of banks are strong, so banks could lend more if people wanted to borrow more. There is no need to create more money. If people and businesses decided to spend a lot more of their money and borrow more to increase their spending, inflation would rise more. There is no need to feed the money fires further.

The task of money management is not an easy one. There is an ongoing slowdown that will be intensified by the squeeze on real incomes next spring due to the delayed rise in energy prices and tax hikes. There is also a strong and predictable rise in inflation that the bank did not predict earlier this year, but is now forecasting.

I would stop the money increases and watch the job market. Only if there is strong evidence of wage agreements generally taking off to incorporate temporary price increases, will we need higher rates. So far, wage increases are only a feature of a limited number of shortage businesses.

The government is tightening incomes too much in the coming year and is expected to cancel the increase in social security planned for April.


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