The Bank’s dilemma

Later this week the Bank of England’s Monetary Policy Committee (the MPC) is due to hold its next meeting, and once again all eyes will be on them to see if they raise rates from their current 0.75%. Most commentators are predicting a further rise, to at least 1%. But there are a number of reasons why this is not such a foregone conclusion as it might appear, and a number of issues which could cause the Bank to hesitate.

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The state of public services

One of the features of the last two years is how different parts of the economy have responded to the stresses imposed by the pandemic, which parts of the economy have been shown to be resilient and flexible, and which have performed poorly and proved brittle, fragile or inadequate. The service provided by the UK’s main government agencies, and the state of the relationship between them and their ministers, is one of the parts of society that has not come out of the challenges of 2020 and 2021 well.

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