“Even if it did turn out to be transitory there were obviously going to be second and third-round inflationary effects that would need to be dealt with.” That was probably a miscalculation,” adds Mr Pugh. “They said it was all driven by pandemic supply chain issues, and then by the energy shock. “The Bank of England helped to create the inflation problem, then said there wasn’t a problem, then called it ‘temporary’, and now runs a significant risk of overcorrecting,” he says. This judgement was wrong, says Trevor Williams, chair of the Institute of Economic Affairs’ shadow monetary policy committee and former chief economist at Lloyds Bank. Back in November 2021, the Bank was widely expected to raise interest rates, but it demurred, claiming that inflation was driven by supply chain shocks and would therefore be transitory. One of Threadneedle Street’s most glaring errors has been to delay its response to inflation, critics say. “If you have better forecasts, you can make better decisions,” says Thomas Pugh, UK economist at accountancy RSM. Britons are now reaping what the Bank has sown.” “Years of low rates and printing money has led to sky-high inflation. “The failing Bank of England has exceeded itself once again,” he says. The latest interest rate increase, which brings the Bank Rate up to 4.5pc, has continued the most aggressive hiking cycle since the 1980s.ĭuncan Simpson, executive director at the Adam Smith Institute, a think tank, has slammed the Bank for poor judgement on inflation. This means that underestimations can have painful consequences. All forecasts are educated guesses, but the Bank’s flow directly into its interest rate decisions.
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