The man who foresaw cost-of-living crisis

Andy Haldane and being a "maverick" + robots + more bad news from China

The governor of the Bank of England, Andrew Bailey, faces questions from MPs on the treasury select committee today amid mounting pressure over his handling of inflation. The Financial Times and Sunday Telegraph have run stories in recent days including on and off-the-record quotes from senior figures in government criticising the Bank for its failure to keep inflation at 2 per cent, which is its public target. This looks like a coordinated PR strategy from the government to try to deflect blame for the cost-of-living squeeze to the Bank. In an interview on the BBC’s Sunday Morning, Kwasi Kwarteng, the business secretary, said Bailey was “doing all he can on this issue”. However, he also said: “It is a matter of fact that when the Bank of England became independent in 1997 they had an inflation target, 2 per cent, and inflation is running almost into double digits now. So that is an issue, clearly." Ouch.

A common criticism of the Bank is that it has been the victim of “groupthink”. However, there was one senior figure in the Bank who was warning about the threat of rising inflation as early as February last year - Andy Haldane, the former chief economist. Haldane was not convinced that inflation would be “transitory” (ie temporary), as others were saying. Haldane’s last day as chief economist was June 30, 2021 and a few weeks before that he wrote a piece for the New Statesman, which is worth re-reading given how prescient it has proven to be…

“Indeed, in my view, this is the most ­dangerous moment for monetary policy since inflation-targeting was first introduced into the UK in 1992 after the European Exchange Rate Mechanism debacle.”

And this quote…

“If wages and prices begin a game of leapfrog, we will get the sort of wage-price spiral familiar from the 1970s and 1980s.”