Perhaps it’s not surprising that, the day after Guy Fawkes night, the Bank of England held off from lighting any economic fireworks at Threadneedle Street on Thursday.
No interest rate cut. No dramatic change to the economic forecast.
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After all, the budget is coming up in only a few weeks and it threatens to be a very big one indeed, chock full of tax rises and spending cuts that could cast a pall over economic growth. As it usually does when something like that is looming, the Bank chose to pull its head back, turtle-like, into its shell.
But there’s no escaping the fact that rather a lot is going on beneath the surface, both at the Bank and the economy itself. We are, for one thing, reckoning with the consequences of a trade war ignited by Donald Trump, which is already having a far-reaching impact on the flows of goods around the planet.
Global and cyber factors
Consignments that once upon a time would pass from China to the US are now being diverted to other countries with lower tariffs, and there are few countries in the world with lower tariffs, particularly on China, than the UK.
This flood of cheap Chinese imports is becoming a notable economic factor, the Bank said in the Monetary Policy Report (MPR) published alongside its decision on Thursday.
Nor is that the only thing going on beneath the surface. For the first time ever, the Bank has had to reckon with a cyberattack having a bearing on its GDP forecasts, with the Jaguar Land Rover shutdown markedly affecting GDP in recent months.
Bank of England governor Andrew Bailey and Chancellor Rachel Reeves
Food inflation is proving stubbornly high – and not just any food inflation. The Bank’s MPR recounts that “inflation among four components – butter, beef and veal, chocolate and coffee – which make up only 10% of the food CPI basket, is…
