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Inside Economics

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This is a space for me to comment on Economics both in terms of the specific bits if economics, how the discipline works and the academic politics. I might also be tempted into talking about the economy!

Iran Update

Politics and the world Posted on Tue, July 09, 2019 12:42:31

Iran update.

Much has happened since the Tanker attacks (the drone shot
down, the US attack cancelled 10 minutes before opening fire). On the Tankers, I think that on balance it
probably was the Iranians. It was a calculated demonstration of what they could
do, but with no loss of life. I think a “false
flag” would have been more spectacular with some loss of life. There was a meeting of the UN Security council,
called by the US, to discuss both the Tanker attacks and the drone that Iran
shot down. Iran was excluded by the request of the US.
The US ambassador, Nikki Haley’s successor Jonathan Cohen presented the US
evidence on both counts: the Iranians were responsible for the Tanker attacks
and the US drone was in international air space when shot down. The net result
was disappointing for the US: the Security Council condemned the Tanker attacks
but did not blame Iran. The three EU permanent
members (Britain, Franc e and Germany) gave a joint press statement calling for
“maximum restraint”. The US ambassador had to stand on his own simply repeating
the US allegations. Worse still, the UAE has shifted its public statements.

In the earlier attacks on ships
in Fujairah, the UAE had agreed with the Saudi government in blaming Iran.
However, by the 26th June, it retracted the statement, saying “there
is not enough evidence to suggest Iran carried out recent attacks on oil
tankers in and around Gulf waters”.
Worse still, the UAE is quietly withdrawing from the Yemen conflict
(according to the Economist July 6th 2019). Probably their proximity
to so many Iranian missiles has focused their minds against a conflict with Iran
and the Economist reports growing dissatisfaction with the cost of the Yemen
intervention. This is bad news for the
Saudis (and their British and American backers): the UAE army is more effective
than the Saudi forces, largely because it has a strong mercenary element. If
the combined UAE-Saudi forces proved insufficient to defeat the Houthis, then the
withdrawal of the UAE forces effectively means game over for the war in Yemen. The Houthis will retain their hold on northern
Yemen and possibly recapture some territory. More importantly, if the UAE is
drawing back to a position of neutrality vis a vis Iran, then this will make
life much more difficult for the Saudi and US in the event of war with Iran. Currently Oman is “neutral”, although in the
past both Saud and UAE have accused it of allowing the smuggling of weapons to
the Houthis from Iran. It does host the US airforce as a “tenant” in a couple
of bases (which were used in both Gulf wars), but in the event of war with Iran
may not permit their use. Qatar is “neutral”,
but subject to a blockade by the Saudis for over a year now. Qatar has remained friendly with Iran and
whilst it would not side with Iran, it would certainly attempt to remain
neutral (although the Al Udeid Air Base airbase in Qatar used by the US air force would almost certainly
come under heavy attack if war broke out). Kuwait is also a friend of Iran and
has been at the forefront of trying to mediate between Iran and the other Gulf
States. Iraq has stated that the US
cannot use its bases there to attack Iran. The Island of Bahrain is the only anti-Iranian
part of the Gulf besides Saudi: it hosts a large naval base for US and Royal
Navy ships and has had problems with its majority Shia population since the
Arab spring. In the event of war with Iran,
the US has little wiggle-room in the Gulf beyond the Saudi coast (ports of Al
Jubayl, Ad Dammam and Dharan) and the island of Bahrain.

The US does of course have many
bases bordering Iran outside the gulf: in Afghanistan, Pakistan and
Turkmenistan. How useful these would be
in an Iran-US conflict is doubtful, particularly if the host governments are
not participating. Furthermore, in the
two Gulf wars, with Nato support, the US was able to transport large quantities
of men and material through Incerlik airport in Turkey and use European bases
as stepping stones to the Gulf. Without the support of Turkey and NATO this
would not be possible except perhaps on a small scale.

So, for me, if the Economist
report is correct and the UAE is dropping out of the “coalition” that leaves
just the US, the Saudis and probably Israel.
The logistics of any war with Iran are formidable without more allies in
the region and support from Nato. As an economist, I am interested because a
war with Iran would be one of the biggest economic “shocks” since the Second
World War, possibly as large as the OPEC shock in the 70s. The Iranians would be able to close the straits
of Hormuz and destroy the existing infrastructure of the oil industry in Saudi
Arabia. This would lead to a sharp reduction in the world’s oil supply and
massive increase in the oil price. The shock would last for a long time. This could trigger a world recession,
stagflation and much besides. Let’s hope it does not happen.

Sources mentioned in Blog.

Al Jazeera: “The foreign minister of the United Arab
Emirates says there is not enough evidence to suggest Iran carried out recent
attacks on oil tankers in and around Gulf waters.” June 26th.

The Economist: The UAE begins pulling out of Yemen (July 6th)

Statements after the UN Security Council meetings (24th
June 2019):





Politics and the world Posted on Sat, June 15, 2019 21:51:39

I am fascinated by the interplay of what goes on with what
we know and what we are told. Of course, we often do not know what is actually
going on: the “truth” will emerge in the future when scholars study
the present as history. Of course, some things will never be known to us, but
only the people who were directly involved. The current case of the Tankers in
the sea of Oman is a fascinating case.

As we know, false flag operations are commonly used to stat
wars: from the Gulf of Tonkin to the more recent “babies in
incubators” at the start of the first Gulf war. Such events or news can
influence public opinion and make it more amenable to war. We also know that
two of President Trumps advisors (John Bolton and Mike Pompeo) have frequently
spoke of their desire for a war with Iran. Indeed, Iran has been on the
“hit list” since 9/11 and before, and we have seen other members of
the list (Iraq, Libya and Syria) hit in various ways: Iran and North Korea are
the last two standing. Also, although Trump ha spoken out during his election
campaign that he wants to end foreign wars, he is also very committed to
Israel, and some believe Iran to be an existential threat to the state of
Israel. So, it would make perfect sense for a “false flag” operation
to kick of such a war. In a sense, the sanctions are an economic war that has
already been started by the US. War would be very unpopular in the US with the
electorate, so a false flag is needed to make it possible.

A war with Iran would be costly for the US, which has many
troops and ships in the area that are very vulnerable. Troops in Syrian and
Iraq, naval and air bases in the Persian Gulf. Of course, the US has the
resources to defend them: the recent pentagon advice was apparently the need
for 120,000 troops. To conduct a war with Iran would require more. The cost for
Iran would also be very great, but short of using tactical nuclear weapons, the
US could not successfully invade Iran and indeed would probably just use
missiles and bombs to destroy as much as possible.

However, we also know that whilst all this is true, there
are also tensions in Iran. There may be some who would want a war with the US.
To strike now, before the US can beef up its assets would allow Iran to reek a
lot of damage. Like Americans, most Iranians do not want war.

So, we see two tankers in the Gulf of Oman hit by something:
mines exploding or some “flying objects”. One, the Norwegian Tanker
Front Altair and the Japanese tanker Kokuka Courageous. The first to report on
this were the Iranian Press TV: they showed the pictures of the burning tankers
subsequently used by the world press. The Iranian navy rescued the crew of the
Front Altair (and released a film of the crew), whilst the US navy rescued the
crew of the Japanese tanker. The US navy issued a grainy film of something
going on and claimed that this was an Iranian vessel removing an unexploded
limpet mine. They also released a picture of the Kokuka with an unexploded
limpet mine on it. The owners of the Japanese tanker issued a statement saying
that it was not a mine, but some “flying objects” that had caused the
fire. Neither tanker was sunk and neither suffered any great damage.

So, what do we make of all this? Well, the US has blamed the
Iranians. But this is standard. Pompeo and Bolton (and many Americans) always
talk of Iran as a state sponsor of terrorism
who “meddles” in the Yemen, Lebanon, Iraq and Syria. Of course, to many of us the Iranians were
crucial in helping the Iraqi government defeat ISIS: both helping the Kurds and
later helping the Shia militias who were to a large part responsible for
fighting ISIS on the ground along with the Americans. Anyway, the Americans do not see it that way:
the Iranians follow their own foreign policy which is rarely aligned with US
policy (and opposed to it in Syria, Lebanon and Yemen). However, there are of course other possibilities.
scepticism of US claims (at least in the twitters-sphere) and the grainy video
is hardly a slam dunk.

The BBC of course usually follows the US line. This has been the case since the Andrew Gilligan
affair on the Today programme, when Gilligan and the director General of the
BBC Greg Dyke lost their jobs over a truthful report that there were no WMDs in
Iraq (and David Kelly subsequently lost his life). However, to do this they
have to be selective in how they present the news. The BBC did not state that the Iranian navy
had rescued the crew of the Norwegian tanker, nor did it show the video of the
crew. The fact that the fires were first reported by Iranian TV and that the
Iranian government had condemned the attacks was quickly forgotten. We were
left with the grainy video and repetitions of the US line. In fact, of the British press, only the
Telegraph really showed some basic attempt to investigate the claims.

The other main sources are of course RT and Al Jazeera. RT
naturally emphasises the US hostility to Iran and the possibility of a false
flag. Al Jazeera simply states both sides of the argument. Both the Russian and
Qatari governments have called for an investigation. The British government has
come out fully supportive of the US “our closest allies”.

In the fog of war the first casualty is the truth. I cannot
say who was behind the attack. It could be Iran, trying to do something with “plausible
deniability” that will disrupt the oil trade. There are those who would like to
draw the US into a war with Iran (Saudi Arabia, the UAE and Israel). Indeed, if
the US did a false flag it would use a proxy not its own assets. However, the vehemence of the US seems to be
to little avail. They have alienated many of their former allies and no one
else wants a war. For Europe a US war
with Iran would mean sky high oil prices and a flood of refugees. Even if the
Iranians were doing some mischief it would not make a war worthwhile. Whatever Jeremy Hunt might think, being a new
Blaire and dragging us into a war with Iran would not be at all popular with
the British public.

Over time, we may well start to learn who was behind the
Tanker attacks. But for now, we just have to see how the different narratives
unfold and hope that cool, calm minds carry the day and we do not drift into

Prevarication and Procrastination

Monetary Policy Posted on Sun, June 24, 2018 19:27:47

Well, not much has happened in terms of interest rates since
my last post in November: interest rates still stuck at 0.5%. However, excellent news that Jonathan Haskell
is to join the committee. Well, there has been prevarication and
procrastination. Interest rates were set to rise, and then not. Mark Carney
continues to have a depressing effect on Sterling. His latest magisterial
intervention was the interview with Kamel Ahmed on the BBC on 19th
April. Prior to that expectations had
been gathering for a 0.25% increase in interest rates. In the interview he stressed the possibility
that increases might happen later rather than sooner. Sterling was then at
$1.43. After that interview, Sterling fell
and has continued to fall, reinforced by the May 9th MPC decision to
keep interest rates fixed. Sterling is now at $1.33. The “Blame Brexit” P.R. campaign has been
kept up. Of course, Brexit and weak
growth have had an effect on Sterling, but I would suggest that Carney’s
interventions have (as usual) talked down Sterling. Andrew Haldane voted for a rise in rates on
20th June (joining Saunders and McCafferty), leading to speculation in the press that maybe
there will be a rise in August.

When I contrast the lack of forward guidance and clarity in
what the MPC policy is, the contrast with the FED is complete. As early as
2014, the FOMC (the US equivalent of the MPC) had clearly laid out a plan. Raise interest rates, and then start to run
down the holdings of Treasuries accumulated under QE. The interest rate rises started in December
2015, with the rate hitting 2% in June this year, with the possibility of more
in the pipeline. The FOMC has regularly updated its policy statements on the
issue and indeed at the end of 2017 it has started to slowly unwind QE by
letting its holdings of treasuries and Mortgage backed securities decline. In contrast, the MPC has not issued a formal
statement on interest rate policy and unwinding QE.

History will not judge the Carney governorship kindly. However,
to look on the bright side, the Bank has started to talk about real interest
rates. Gertjan Vleighe gave a speech
talking about them last November. Excellent news. I am not sure I buy his idea that “low rates”
can be a normal state of the economy (the
example of world war two and the years just before and after has little
relevance for today). However, once you
accept the idea that the equilibrium real interest must be non-negative, it at
least puts a floor on sensible nominal rates (they should be no less than
inflation). Assuming inflation will be
on target, that would imply nominal
interest rates of at least 2%.

Also there is talk of Carney’s successor. Luckily the menopausal Broadbent has ruled
himself out. In my opinion, the idea of a Goldman Sachs alumnus as governor of
the Bank is not a good idea. There are
some excellent people for the job: Sir Charles Bean (Mervyn King’s number 2) to
name one. But why not go for a non-banking person. Kate Barker would make an excellent choice in
my opinion. She is a leading business economist and was on the MPC from 2001 to

At Last.

Monetary Policy Posted on Sun, November 12, 2017 09:47:05

I am in China at present, but the recent increase of the interest rate to 0.5% even made the news here. However, welcome as the increase is, all it does is to reverse the disastrous mistake of the post-Brexit cut of August 4th 2016. Let us recall the nonsense spoken by Carney at the time. Carney argued that Brexit would lead to job losses of 250,000 and that further interest rate cuts were in the pipeline, as was a further extension of QE. “There is a clear case for stimulus, and stimulus now, in order to have an effect when the economy really needs it,” he said. The result was a slump in Sterling. In the aftermath of the Brexit vote, sterling had fallen from around $1.45 to $1.30. After the Bank’s new policy it fell to $1.20 and below, to lows not seen since the 1980s. What happened after the recent reversal? Well, we see sterling back at its immediate post-Brexit level (todays rate is $1.32). And, recall that for most economists the post-Brexit world looks rather more dark than it did in mid-2016.

Since its August cut, there has been a largely successful public relations strategy of blaming all of the increase in inflation on Brexit. However, whilst Brexit played a role, the Banks own policy of easy money played only a slightly smaller role. I have not done the exact calculations or simulations, but as an off-the-cuff-Ball-park I would apportion “blame” for the increase in inflation about 60% to Brexit and 40% to the Bank of England. There has been a 3% increase in inflation since mid 2016. If the Bank had kept the interest rate unchanged at 0.5%, we would have now had inflation around 1.8%. The Bank’s post-Brexit cut and general loosening added another 1.2%.

So, the Bank has at last reversed the mistake. Will they start the path back to normal: long-run nominal rates equal to the target plus a real rate of 1-2% (i.e. nominal rates around 3-4%)? The next couple of meeting of the MPC are crucial here. Will common sense prevail, or will there be prevarication and procrastination?

A Tale of two Bankers: Carney the reckless and Haldane the wise.

Monetary Policy Posted on Thu, June 22, 2017 16:57:09

We have seen two recent pronouncements by leading Bank of
England MPC members: Governor Mark Carney at the Mansion house and Chief
economist Andrew Haldane in an interview with the Telegraph. But first, we have the very welcome announcement
that the new committee member replacing Kirsten Forbes is a real economist, Silvana
Tenreyro a Professor at the LSE. Just to explain why this is a welcome
appointment. The Chancellor is responsible
for the appointment, which is made through the cabinet office. Under George
Osborne we saw a shift in the type of person being appointed. Out went established academics like Mervyn
King, Charlie Bean, Martin Weale. In
came “city economists” from investment Banks.
Ben Broadbent (Goldman Sachs), Michael Saunders (Citi), Gertjan Vlieghe (Brevan Howard hedge fund). This is the first appointment under
Hammond. It is like for like: a serious
academic for a serious academic. However, I think we can heave a sigh of relief
that it is not another “city economist”.

I see two problems with appointing more than one city economist to the
MPC. There is the issue of regulatory capture. The Bank needs to be independent of the City. The
Bank has a regulatory role to maintain financial stability: since the
investment banks have been major sources of instability it is strange to have
their people at the top of the bank. The
Bank is supposed to be keeping inflation on target in the interest of the whole
nation. Its current policy of allowing
inflation to rise and failing to keep interest rates up with inflation (and
hence plunging the nation into financial repression) might be interpreted as
acting in the interests of the very investment banks and hedge funds from which
the MPC members have come. Now of course, city economists are perfectly capable of doing the right thing. Michael Saunders is one of the three who recently voted to raise rates: respect. However, perceptions matter and there is the possibility of a conflict of interest. The next
appointments will be a real signal, enabling Hammond (or his successor) to show
that the Osborne era is over and that the MPC and Bank of England needs to be independent
of the investment banks and the City. Mr
Osborne of course has since become part of the city, with his appointment in February
2017 as part time advisor to BlackRock, the world’s largest investment Bank.

Mark Carney
made what in my opinion was an amazingly reckless speech at the Mansion house.
Inflation is currently just short of 3%, the upper limit of the range. Three members of the MPC voted to raise
interest rates. The real implications of
having interest rates at 0.25% whilst inflation is 3% are really hitting home
to the public and politicians. Carney is
of course distracting us by blaming Brexit.
I opposed Brexit (as did nearly all economists), but it is rich for the
Bank of England to blame inflation on Brexit when the Bank has done nothing to
restrain inflation, which is its main job. Real interest rates have tumbled and
now stand well below minus 2. The Bank’s
own forecasts in mid 2016 predicted a rise in inflation to 2.8% by mid 2017. The surge in inflation was foreseen, but the
Bank did nothing. In fact, it made
matters worse by cutting interest rates by 25 Basis points post Brexit vote. A classic “Greenspan put” as seen in the run
up to the 2008 financial crash. Now, almost 12 months on, his Mansion house
speech was a loud and clear statement that “Now is not yet
the time” for interest
rates to rise. In effect, he is talking
down sterling at a moment when inflation may well break through the 3% barrier.
If it does go above 3%, I think that
Carney should be made to step down. Keeping
interest rates at near zero when inflation has risen by almost 3% is just
stoking up some huge problems and possibly another crash. The correct policy would have been to start
raising interest rates gently last year, with the aim of getting to a level of
the inflation target plus 1-2%: that is 3-4%. The US Fed is doing this. Unlike Carney, Janet Yellen is a serious
economist who understands these issues and has not spent time in an investment
bank or hedge fund.

Andrew Haldane
is a serious academic economist. In the recent Telegraph
interview, he said “might have to rise this year to nip inflation in the
bud and prevent a sharper jump in rates in future”. The
phrase “to Nip inflation in the bud” is a bit rich: the inflationary horse has
already bolted. Any bud nipping was due
last year. The MPC needs to look ahead.
Anyway, at least he is starting to think in the right way. More important is his statement “to prevent
sharper rises in the future”. Yes, keeping
rates so low can actually be a threat to the financial stability the Bank is supposed
to be maintaining. Sharp rises in the future are just what is required to
trigger a financial crash. Well said
Andy! Raising interest rates has become
not just an issue of avoiding financial repression and keeping to the Bank’s inflation
target, but also protecting the very stability of the financial system.

Carney on the line.

Monetary Policy Posted on Mon, May 15, 2017 15:19:08

Inflation is getting very close to the 3% upper limit and is well above the 2% target. This was not unexpected: it was indeed predicted by the Bank last year. As I argued last September (2016), interest rates should have been increased then in order to keep inflation closer to target in 2017. However, many forecasters predicted inflation might well rise above 3% in the next few months. For me IF inflation exceeds 3%, this will be a defining point in the recent history of monetary policy. It will demonstrate that Financial repression is the real policy of the MPC and inflation targeting is only secondary. If inflation crosses the 3% line, there is little excuse for Carney. He will blame Brexit. This has been a very successful diversion of attention away from the fact that the increase in inflation was easily avoidable in September last year. A modest rise in interest rates (maybe in line with inflation) would have been enough. The reason the Bank of England is responsible for setting the interest rate is that it is supposed to target inflation. If it is proving unwilling to do this, then its independence is really something we should all question. Blaming Brexit for a failure in monetary policy is a lame excuse.

So what would a sensible policy be? Simple. If we take the view that the real interest rate is 1%, the current nominal rate should be increased until it is equal to this 1% plus the inflation target of 2%: that is 3%. The long-run real rate might indeed be higher, indicating a long-run nominal rate at 4-4%. However, let us take things step by step…3% is at least in the ballpark.

Real Interest rates.

Monetary Policy Posted on Mon, February 27, 2017 22:06:36

Can there be an equilibrium real rate of interest that is
negative? In general, the answer is no. If we think of a steady-state where
consumption is constant, then because the household discounts the future, the
real rate of interest has to be strictly positive. The real interest rate corresponds to the
marginal product of capital. In a representative agent economy, a negative real
interest rate is possible as a transitory phenomenon, and would correspond to a
decumulation of capital indicating that the capital stock was too large and
hence the household would seek to reduce it by maintaining a high level of
consumption with possible dis-saving (consumption in excess of income). A
negative real interest rate would be a temporary phenomenon on the path to
steady-state: along the path, as the capital stock is reduced, the real
interest would get back into the positive territory. In the Ramsey model, a
very large initial capital stock yielding a negative marginal product would
result in a high level of consumption which fell over time, with

Matters are different in OLG models, which are not in
general dynamically efficient. In a simple exchange economy without production,
it is possible to get a negative real interest rate in equilibrium. If current consumption is cheaper than future
consumption, you need to give up more now to get less in the future. The key assumption needed is that there is no
storage or capital: one generation trades with another. Eggertson et al (2017)
have a model where people live for three periods: they have endowments middle
age and when old: they borrow when young.
Assuming that the endowment is largest in middle-age, consumption smoothing
indicates that they will borrow when young, and save when middle aged to
augment their retirement consumption (the old consume everything they
have). At any time, there are all three
generations living together. The middle aged at time t can only save for when
they are old in t+1 by lending to the young at time t, who will repay the old
at t+1. Here, the young demand loans
(consumption) from the middle aged; the middle aged lend to them so that next
period they get paid back and their old aged consumption is increased. The real interest rate here can be positive
or negative, depending on the balance between the supply and demand for loans.

In order to link this monetary policy, we need to introduce
nominal wages, nominal prices and a nominal interest rate. Making various
assumptions, Eggertsson et al show that there can exist “a unique, locally
determinate secular stagnation equilibrium”
(Proposition 1, page 21. Figures 4 just above the proposition make the essential
role of deflation clear).
However, the secular stagnation
equilibrium must have deflation: negative inflation. If inflation is positive,
then there will be full employment. This
is because the mechanism reducing output is the increase in real wages. So, in
a secular stagnation equilibrium, the nominal interest rate is at the ZLB (zero
lower bound), output is below full employment, inflation is negative and real
wages above their full employment level (due to downward rigidity). The actual real interest rate is positive
(equal to minus the deflation rate): it is a hypothetical real rate that is
negative (the real rate that would restore full employment). The ZLB does not lead to an equilibrium
negative real interest rate: it prevents the real interest rate from becoming
negative when inflation turns negative.

Have we observed
negative inflation? In the UK and the US just the occasional month in 2016 and
(depending on whether you use CPI or RPI) perhaps for a month or two at the
height of the crisis. Japan has had more
disinflation since the late 90s (disinflation “peaked” at just over -2% in
2009). The Eurozone is a mixed bag: the
aggregate inflation rate has mainly been strictly positive with a few
exceptions as in the UK and US. For
individual countries the story is more heterogeneous. So, if we look at the
major economies, there is no evidence of sustained disinflation that might give
rise to the high real rates required for Eggertsson Stagnation. In fact we find
the exact opposite. The ZLB is combined not with negative inflation, but
positive inflation. Rather than positive real rates, we find real rates are

This brings us to
the most important an obscure part of the paper: section 8, the model with over
100 equations. Here there are lots of
generations and capital is introduced. The key equations are buried in the
appendix: A81 and A82. The marginal productivity for capital A81 is the usual:
the marginal product of capital will be strictly positive. Then there is
A82. This is a little different: there
is a price of capital goods term. Greg Thwaites has developed a model of
falling real interest rates driven (in part) by the falling price of investment
goods. There has been a downward trend in the prices of investment goods
(relative to consumption goods), which means that savings leads to more
investment (but possibly lower investment expenditure). This can drive down the
marginal product of capital. However, in Thwaites model the real interest rate
may be low, but is always positive. So what is it in the Eggesrtsson model that
can give you their figure 7: secular stagnation with strictly positive
inflation (recall, this was impossible in the world of proposition1). I must
admit, that I have read the paper and am none the wiser about how this might be
possible. The paper just presents a
calibration and reports that this is what happens. Unlike the world of
proposition 1 there is no clear story or intuition.

I do not doubt that with sufficient
inventiveness a model with equilibrium negative real interest rates can be
constructed. But it would not be a basis for monetary policy. Monetary policy
needs to be based on robust models that have passed the test of time, not on
exotica. I will continue to believe that real interest rates should be strictly
positive in equilibrium.

Growth in 2016.

Monetary Policy Posted on Thu, January 26, 2017 14:58:24

It is getting more and more unreasonable for the MPC not to raise interest rates, at least to keep in line with inflation. The ONS has announced that the UK had growth of 2% in 2016. What possible reason could the MPC have for not at least keeping the real interest rate zero, if not 1-2%…….The nominal interest rate should be raised immediately to at least 1%. It should have been raised a few months ago, but better late than never.

There can be no possible reason to leave interest rates at 0.25% when inflation is going to be above 2% for quite some time.

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