Today, the rate-setting Monetary Policy Committee at the Bank of England announced that they’re raising the policy rate by 25 basis points to 0.50%. They said they expect annual inflation to accelerate above 7% within months because of low unemployment and surging energy prices. Markets were off slightly on the news, with the FTSE100 falling after the announcement.
Monetary hawks and doves will both be disappointed by this raise. Doves will argue that consecutive raises—like this was—will burden the economy and put pressure on private and public finances during a spiralling cost crisis, while hawks will argue that it is too-little-too-late to reign in inflation. Whatever your view, the Bank of England is in an unusual position and monetary policy is careening out of control. The economy has been on life-support since the ‘08 financial crisis and the Bank will struggle to save it.
Firstly, the Monetary Policy Committee is too sluggish. At no time in recorded history has the U.K.’s centra…