UK Politics
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sunak has zero control over interest rates, (or inflation) but hes said specifically he will bring inflation down. he tried to take credit for something entirely out of his control, gambling with peoples futures and its blown up in his stupid face. The entire G7 is about half what we are seeing. As an investment banker he knows perfectly well the BoE has independent power over rates, and that they also have limited power over inflation.
Yeah. Ultimately this is the BoE's fault for not acting faster and harder. Interest rates would still have gone up but the pain may have been less severe.
Sunak was a fool for trying to take credit for Inflation. He based it on the optimistic predictions that inflation would rapidly come under control and improve towards the end of the year. Instead inflation is not shifting, and interest rates are likely to need to stay higher for longer and probably go up further, plus we're now realistically looking at a potential recession.
Sunak is out of his depth, and it's yet another poor leader in a run of 4 now (May, Johnson, Truss) showing how depleted the Conservative party is of talent and any sort of vision.
id argue Cameron was also piss poor, albeit a much more pragmatic centrist. His decision to allow the brexit kettle to boil is one of the fundamental reasons we are in this utter shitshow; half the labour force has gone, and the local British workers wont work for peanuts hence huge wage inflation. Ok granted not even Cameron could have forseen how bad it is, but thats no consolation when he also slashed the public sector to bits, and they all now absolutely need a pay rise too. Argh
Exactly, he made a promise he will not be able to deliver. It will almost certainly come back to bite him in the next year. The general public are not financially literate enough to understand inflation in the first place.
Which makes why he'd make that mistake even more ridiculous.
Unless he was as good an IB as he is PM ofc...
I read one interesting take that his promise may even have made inflation worse, as some economic actors will have made investment decisions based on an assumption that inflation would half (pushing up inflation further).
I'm not actually that sold on that theory, but it's an interesting angle.
@snacks
@noodle Technically he could take away the BOA’s independence if he truly wanted to, I believe Liz Truss threatened to do exactly that when they were fighting her tax plans, but the markets probably wouldn’t like it if he did. It’s weird to think that not so very long ago, politicians having complete control over interest rates was entirely normal.
Not quite. Inflation can be caused from the supply side, and from the demand side. While inflation caused by the demand side (covid stimulus) could only be addressed by BoE rates, the inflation caused by supply side (covid disruptions in supply chain, followed by Russia → Ukraine war hitting energy prices, and continuous problems arising from brexit) is something that he could influence.
So, to sum it up, he has partial influence over the inflation, and in addition to what he could control about the supply side of inflation, he was betting that BoE would be doing a better job controlling the demand side of inflation.