Already, mortgage arrears and defaults are rising, with interest rates doubling or more for homeowners – hundreds of thousands of them – now coming to the end of fixed-term deals struck when rates were at rock-bottom.
Debt charities are raising the alarm about a serious spike in households struggling to make ends meet, as the cost of credit soars.
The UK now has the highest inflation rate in the G7. The reality is that, after the Fed holds rates, and the ECB raises to a level well below borrowing costs in Britain, the Bank of England is going to face a very serious onslaught of criticism later this month – with many calling for its independence to be revoked.
This column has been highly critical of Governor Andrew Bailey and the Monetary Policy Committee for some time, warning as far back as March 2021 that inflation could soon surge, and calling for rates to rise.
So let me say clearly that the problem isn’t that the Bank of England is independent. The problem is that – with the appointment of MPC members now totally dominated by the Treasury, and the committee riven with groupthink – the Bank of England isn’t independent enough.
We need economists holding a wide range of views setting interest rates – including out-of-the-box thinkers, Brexiteers and those who believe, like me, that endless QE money-creation by the Bank, particularly during lockdown, also helps explain why UK inflation is so high.
Bailey appears before the Lords economic affairs select committee on Tuesday. He needs to start acknowledging that the Bank of England suffers from a severe lack of cognitive diversity – a grave weakness that has severely compounded our inflation problem and which needs to be put right.
Follow Liam on Twitter @liamhalligan
