Andrew Bailey, Bank of England Governor, was confronted last night by MPs and economists who were enraged at his ‘crying for wolf’ response to an increase in interest rates.
Critics questioned whether he was the right man to lead the Bank after a ‘big communications failure’ on interest rates prompted lenders to raise mortgage costs unnecessarily – and sent currency markets into a tailspin.
Also, Mr Bailey was criticised for his focus on the Bank’s connections to slavery trade and the fact that officials were allowed to continue working at home during a time of rising inflation.
In the City’s nickname, the Governor was the “sexy turtle” because he signaled that interest rates would rise by stating in October that Bank ‘will need to act’ in order to curb inflation. This is currently predicted to reach five percent next year.
Critics questioned whether Bank of England Governor Andrew Bailey (pictured) was the right man to lead the Bank after a ‘big communications failure’ on interest rates prompted lenders to raise mortgage costs unnecessarily – and sent currency markets into a tailspin
However, he shocked economists last Thursday by voting against an increase. Rates remained unchanged at 0.1%.
Lenders like Nationwide, NatWest and HSBC had been so persuaded by Mr Bailey’s previous comments that they had either pulled out their best deals in advance or even put up rates. Investors in the city were also misled, as the pound fell against the dollar for the first time since August.
Gerard Lyons (economist), who had previously been in the frame to be elected Governor, stated that millions of borrowers are paying the price for poor communication from the Governor.
‘It’s already led to higher mortgage rates – so it’s already impacted people’s finances,’ he said.
But Mr Bailey, who voted against any increase last Thursday, surprised economists. Rates remained unchanged at 0.1%. Image: The plunge in the Pound after the election
Andrew Sentance is a former member, who sets rates for the Monetary Policy Committee. Sentance accused Bailey, of failing to communicate effectively.
According to him, “Andrew Bailey should recognize that any slight nuance in his words is quite important for the market. He had previously made statements suggesting that the Bank would raise rates. Although he had plenty of opportunity to explain the situation, he didn’t.
Helena Morrissey was a former candidate for the Bank’s top job. She stated: “There is a danger now. [policymakers at the Bank of England]You are seen as a crying wolf, and people will not listen or consider the statements to be true. For the Governor’s confidence to return, there must be less talking out loud.
Andrew Sentance (pictured), a former member, of the Monetary Policy Committee which determines rates, has accused Bailey of having a ‘big communication failure’
Former banker and Conservative MP Steve Baker stated that he now understands the dangers of the Bank intentionally herding markets participants through what they speak. It is clear that this misuse of discretionary powers by an institution indifferent to profit or loss has created a threat to orderly market. They have led market participants to error.
Following the rates vote last week, Mr Bailey said: ‘None of us ever said – I never said, none of my colleagues ever said – rates will go up in November.’
The 62-year-old Mr Bailey has been questioned for his focus on other issues than rates and inflation as the country tries to heal from the pandemic. Also, the rise in fuel prices and goods ahead of Christmas have drawn attention.
The Bank took away oil paintings and busts from seven prominent figures between 1698-1814, claiming they were linked to slavery. The Bank has appointed a researcher who will ‘examine in detail the Bank’s historical links to the transatlantic slavery trade’.
Sir John Hayes (Conservative MP for South Holland, Deepings, and Chairman of the Common Sense Group think-tank) stated that the Governor should focus on helping to sort our economy and working closely with the Chancellor about how to achieve the right fiscal priorities. He clearly spent much of his time researching the Bank’s past in search for any new horrors or inventions.
“It’s amazing that he didn’t appoint someone to research the bank’s historical connections with the transatlantic slave trading, as if it’d make any difference to mortgages or economic health.
‘He needs to knuckle down and do the job with which he’s been tasked – and stop the moral posturing, posing and pontificating.’
A senior City source stated that Mr Bailey was not able to communicate effectively with international audiences. The problem is that Britain has a lot of problems right now.
In March 2020 Mr Bailey became Governor. He now allows Bank of England employees to work remotely from their homes, except for one day per week.