Holding interest rates is not the way to go. That will hamper economic activity and hammer millions of people with mortgages and loans. We need to see rates come down. Monetary Policy Committee will likely again be divided on the Feb decision.

We have a BoE interest rates decision coming up on 5th Feb: unemployment is increasing and is at 5.1%, wage growth is slowing. Inflation is being driven by one-off air fare oddities + the UK's unique exposure to supply shocks + and administered prices that won't drop out the numbers til April.

And (2), supply-shock-driven food and energy prices still feed through to core inflation, indirectly, as they serve as inputs to businesses across sectors.

And yesterday's data showed wage growth slowing in the three months to November to 4.5%, down from 4.6% in the three months to October.

The problem with that is (1) services inflation recently is not all about labour costs - and has been largely driven by jumps in regulated/administered prices from April 2025 (so y-o-y inflation starting before that incorporates the jump) that are in government's control.

What does this mean for interest rates? BoE looks to: (1) labour-intensive services inflation for a sense of how much increases are driven by labour costs, thus warranting rate hikes; and (2) core inflation excl. food + energy to try and see past supply-shocks that hikes won't address.

Price rise in air fares this time last year were the third lowest since 2001, hence the jump up this year. And whereas last year, most long haul flights' scheduled landing was New Years Eve, this time around most landed a day earlier - so more expensive flights captured in the Dec data this year.

We must invest in addressing the climate crisis for economic stability. BoE has it's role to play in that, just as govt has it's role to play in tackling inflation theguardian.com/business/202... 4/4

But we can't rest on our laurels. Food inflation temporarily slowed in Nov yet the climate crisis will increasingly impact production at home and abroad - see Christian talking about chocolate: linkedin.com/posts/christ... 3/4

No doubt government interventions on the CoL this budget (energy bills, rail fare freezes) will help the downward trajectory into 2026 (OBR forecasts 2.5%), hope to see more of this (mon-fisc coordination in inflation-fighting) in future 2/4

@neweconomics.bsky.social

5/5 It's a move towards better coordination. Lower inflation means BoE can cut rates, lowering the cost of green investment and mortgages. Lower interest rates means lower government borrowing costs - opening space for the investment we desperately need: investinbritain.org.uk/resource/clo...

4/5 Government has also recognised the need for stronger regulation on specific dysfunctional markets - like dentistry - to bring down costs. Another nod to the relative efficacy of government policy over general interest rate policy for targeting specific sector cost issues.

3/5 ...although cutting energy bills must not come at the cost of better insulating and retrofitting out homes - more on this (ECO etc) in another thread.

2/5 High interest rates can't bring down energy price spikes caused by geopolitical conflict and the UK's overreliance on gas. Yet energy costs feed through to almost all other prices. Fiscal policy is better suited to tackling this - government now rightly recognises this.

As @theoharris.bsky.social set out last year - the NWF could raise £100bn by issuing its own bonds:

--> neweconomics.org/2024/10/the-...

The NWF has the potential to deliver huge benefits for the UK economy, it's time for a step change in ambition!

Not only would this enhance the NWF's independence from the Treasury when funding projects, but will grant it more space to grow in scale & ambition and have serious impact - it is currently miniscule relative to international comparators:

www.bloomberg.com/news/article...