Omicron has caused economic instability and severe health effects. To force interest rates to rise, the Bank of England would need less timid leadership.
An assertion of ‘inaction bias’ by the International Monetary Fund in its latest inspection of the UK economy will hurt on Threadneedle Street.
But, as governor Andrew Bailey has made clear from the earliest days of the pandemic, in national crisis the Bank’s first duty is to prevent scarring of the economy.
To reduce rising bills, Ofgem proposes reforms that include quarterly and even monthly adjustments of the energy price cap in order to be more supplier-friendly as well as consumer-friendly
There is no escaping the fact the interest rate-setting Monetary Policy Committee (MPC) – with the notable exception of former chief economist Andy Haldane – allowed the inflation genie to escape.
But the bigger question is, if Banks had taken action earlier to stop the shock caused by the rising cost of living would that have any impact?
A rise in the MPC’s current rate, which is 0.1 percent, to 0.25 percent, with the goal of matching the market rates close to 1%, would be beneficial.
It could have been cut if it was presented with the new version. The difficulty is that with so many of the factors driving up inflation beyond the Bank’s control, raising interest rates might not have made an iota of difference to the 5.1 per cent consumer price headline.
However, it is important to not underestimate the behavioral effects that a rate increase has on businesses. It makes them more cautious when raising prices. The consumer is less inclined to buy.
It’s alarming that food costs are rising as it affects the poorest members of society during the peak holiday period.
Energy is the real shocker. The real shocker is energy. Energy prices are up 28.5% year-on–year for fuel, 18.8 percent for electricity and 25.3% respectively. Volatility in energy markets doesn’t directly respond to interest rate interventions.
Britain’s main weapon in the fight against higher home energy bills is Theresa May’s panicky, badly designed price cap.
The only thing it’s done so far is knock 25 companies out of energy markets, land the Government with an enormous bill, temporarily delay the terrible day for users who have stayed with it and to make it difficult for them to get back on their feet.
Since the last review, the gap between wholesale prices and the cap has swollen by £700. What can we do now? Ofgem proposes reforms, including monthly or quarterly adjustments to cap.
Although reform is needed, it is important to restore free competition and ensure that those less fortunate receive greater state support. However, removing the cap would be a boon for current gung-ho Opposition members.
Gaming is the future
Currys is one of the enterprises that are suffering under Omicron’s clod-hopping Government response.
Instead of a booming build-up to Christmas from the UK’s market leader in electronic goods, the chain is finding it hard-pedalling as we move into what should be the hectic final days of shopping.
Alex Baldock, chief executive believes that the Government’s response to this new version has caused a drop in consumer confidence. This led to a fall in the share price.
Nothing much has changed as we look forward. Baldock is sticking with a forecast of £160m before tax profits for the full year and £250million of free cash flow by 2024.
Some of the issues inherited from Carphone’s bad mobile phone contracts have now been resolved.
The demand for Iphone 13 and other new models is strong. Sales growth in overseas markets is faster than that of the UK. The standouts are Greece and the Nordics.
This season’s big sellers have all been related to gaming, with Nintendo consoles as well as virtual reality being among the most loved. Galaxy watches and other fitness monitors will continue to be a big hit.
The market reactions are not as positive as with many FTSE-listed stocks.
Film noir
Big grossing movie titles such as No Time To Die and Spider-Man: No Way Home only go so far when a company is living under a debt mountain of almost £6billion.
So the £725million penalty imposed on Cineworld for failing to complete its takeover of Canada’s Cineplex is a body blow which leaves the world’s second-largest chain of cinemas gasping for breath.
It will be crucial to determine whether lenders are willing to lend additional oxygen in order to get it through an uncertain appeal.
Nearly a third of the shares hit its blockbuster.