July 2026 - My Replies
1. What would your vote on interest rates be?
Raise 50 bp, raise 25bp, hold, cut 25bp, cut 50bp
Raise 25bp
2. What has influenced your decision?
Over the past five years, we have been at or below the inflation target in only four months out of sixty: we need to re-state our credentials for maintaining price stability. And not focus on over-engineering (or discussing) quarter point movements in response to high frequency and noisy data. During this business cycle monetary policy has not met its prime objective and inflation expectations have becoming entrenched at a level inconsistent with price stability. Alongside a firmer stance against inflation, communication must be more consistent about the need to act with vigilance against inflationary impulses and not to look for excuses to cut rates.
3. What is the single best policy (or combination of policies) that Burnham could do to ease the cost of living in the next 12-18 months while sticking to the fiscal rules? - optional
A strategy for fiscal consolidation, which would (i) rein in ad hoc spending commitments, (ii) look to dampen public sector wage demands that look increasingly excessive and (iii) consider further entrenchment in the numbers of public sector workers. By reducing real or imagined constraints on the path of Bank rate, it will support the MPC's achievement of price stability, which is surest route to easing the so-called "cost of living crisis".
4. Additional comments
After the turmoil of the past few years, we need a serious and leak-free approach to the Autumn Budget in order to help prevent bond market broiling. I wish the new Chancellor and Chair of the OBR every success. I would also like finally to see a comprehensive and full response from the BoE to the April 2024 Bernanke Review.