Finance, political campaigner, broadcaster, and geopolitics/economics trends expert, Dr Roger Gewolb, head of the Campaign for Fair Finance, comments on the big 2024 economic and pre-election talking points, inflation and growth, which will be in the news again this week when the latest consumer and producer price index figures are released on Wednesday.
Dr Gewolb has previously criticised the BoE’s for raising interest rates fourteen consecutive times, and more recently their decision to hold interest rates at 5.25%, stating that “it’s time for the Bank to take action to avoid further negative impacts”. Along with noted economist Catherine McBride and other experts, he has been calling for the Bank to reduce interest rates immediately and introduce major reforms.
“The outlook for UK inflation has slightly improved recently, thanks to the fall in petrol prices, which had absolutely nothing to do with Bank Of England’s rate rises,” explains Dr Gewolb.
“UK economic growth is extremely fragile, GDP grew only 0.3% in November and fell 0.2% in the three months to then, according to last week’s ONS data. This is flatlining growth and stagnation, if we consider Black Friday and early Christmas sales, which contributed to this more positive November data”.
Analysing the current forecasting data on CPI and UK Employment and what BoE reaction could be Roger, Gewolb, added, “The Bank of England is now stating that ‘elevated levels of wage growth are a sign that domestic inflationary pressures remain too strong to begin lowering interest rates’.
“However, this statement has two flaws. Firstly, the UK is experiencing cost-push inflation caused by materials and services, not consumer spending. Secondly, raising interest rates prolongs this type of inflation, which have turned the UK into a ‘stagnation nation’.
“To now claim that we are going through a consumer-driven inflation caused by wage rises, which are themselves the result of prices driven up by base rate rises, is sheer madness”.
Gewolb has been vocal throughout his expert comments across UK National media about Andrew Bailey and BoE mismanagement of the UK monetary policy.
He said, “The issue with keeping interest rates higher for longer in the current tight UK labour market means that companies will pass on costs to consumers to try and protect their profit margins, which could lead to a prolonged period of higher core inflation, and this is what is exactly happening right now.”
Experts say the Red Sea conflict won’t cause global inflation, but if it worsens, fuel and supply chain prices may increase and cause inflation rates to rise again.
On this issue Dr Gewolb said, “The Bank is expected to lower its main interest rate from 5.25% to around 5% throughout the year, starting in May.
“However, this may not be enough to improve the economy or inflation, which is currently at 3.9% and well above the target rate of 2%. With the risk of higher prices due to shipping issues in the Red Sea, the last thing the Bank should do is to raise interest rates again, they must leave them where they are until the situation begins to settle and then begin to lower them”.
After his recent visit to the United States, where he had discussions with prominent geopolitical and economic experts as well as members of both Donald Trump’s and Joe Biden’s teams.
Gewolb said that inflation in the US “is mainly fuelled by consumer demand, which is quite different from how it works in the UK. The Federal Reserve may start raising interest rates soon. However, the Bank of England’s Governor, Andrew Bailey, and his colleagues should not blindly follow the United States’ lead. They need to listen to various perspectives before making a decision, as blindly following the US would be a wrong move.”
On the future of the UK economy, Dr Gewolb added, “The economy will likely remain sluggish for the near future. Despite the light easing of headline inflation rates, companies and ordinary Brits are still grappling with high-interest rates. Businesses are screaming for long-term economic plans that prioritise growth.
“This must be the focus for all politicians in the upcoming budget and election campaigns, rather than Sunak and Hunt claiming victory over inflation.”