Bank of England Promises To Get Inflation Down. Really?

Chief Economist at the Bank of England, Mr Huw Pill, has promised in a speech yesterday, as reported by the BBC, that the Bank of England is committed to getting inflation back down to 2% pa.

Mr Pill suggested that the Bank will speed up interest rate increases rather than the staged 0.25% incrrements currently being deployed. 

Inflation was bobbling around at a staggering 9.1% pa for Consumer Prices Index (CPI) and an eyewatering 11.7% pa for Retail Prices Index (RPI) for May.  June inflation figures are due soon and we do not expect any major reduction in inflation but we are hopeful of stabilisation but even the Bank of England is forcasting CPI at 11% in June.  This tells us that dramatic action is required.

Comment

We have said it before and we say it again.  Governments need sustained, higher inflation to devalue covid-19 debt before it is due to be repaid in say 20 years and actions such as not reducing taxes on fuel, keep prices high as does stimulating the property market with tax efficient savings plans and proposed 50-year mortgages will not reduce property prices but only increase them.  Wages will increase, property prices will increase, company profits will increase.  All will gdeliver much higher tax revenue over the coming years as well as devalude 75% of government debt (only 25% in inflation linked).  The Bank of England’s ‘smoke and mirrors’ messages on inflation is exactly that, you can ‘put it in your pipe and smoke’ out the ‘white lie’.  They want and need inflation.

We suggest that staged increases of say 1.0% pa every 6 months to a top end of 4% pa interest rates will strenghten the £, bringing costs of imported goods down and of course lower spending.  When combined all these affects will bring inflation down in a controlled manner.   Governments warned that this may mean inflation, make no mistake it is coming whether interest rates stay lower or are increased at the rate we suggest.