The Bank of England is behind the monetary curve again. Last week the monetary policy committee’s two most hawkish members switched from voting for interest rate hikes to leaving the Bank rate unchanged at 5.25 per cent, signalling a pathway to future policy softening.
Yet beneath the headline 3.4 per cent annual inflation rate, prices have already flatlined since last September. An overly tight monetary stance looks all set to deliver below-target inflation, and possibly even deflation — errors the Bank could have avoided.
Economists who take the money supply seriously are aghast. Back in early 2021, the monetarist Tim Congdon showed that the quantity of money had grown by a massive 15 per cent in the pandemic’s first year, the fastest growth in four
