Ex BoE Boss says "We Told You So"

Carney telling it like it is, in my view.

Edit:

And another one saying a similar thing:  

www.independent.co.uk/voices/mortgages-inflation-economy-brexit-housing-market-b2361511.html

‘The monster is out of its cage’: how Brexit set inflation loose to feed on Britain

To use a technical economic term, the latest UK inflation number is a stinker. So, far from rapidly tumbling towards the government’s target of 5 to 6 per cent by the end of the year – let alone the Bank of England’s 2 per cent medium term aim – inflation is not just sticky, but in fact stuck: at 8.7 per cent a year.

We can blame the Bank of England, post-pandemic disruptions, Putin’s war in Ukraine, or Rishi Sunak. All have played their part in creating the predicament in which we find ourselves. Unfashionable as it may be to say, though, Brexit is also a malign factor, and Britain’s unique misfortune.

For we now see clearly that inflation is higher in the UK than in other comparable economies, and has been for some time. Catherine Mann, a distinguished economist who sits on the Bank of England’s monetary policy committee as an independent, calculates that Brexit has meant prices are around 4 per cent higher than they would otherwise be thanks to the cumulative effects of the 2016 EU referendum decision, when set against comparable economies, not least because “no other country chose to unilaterally impose trade barriers on its closest trading partners.”

Disrupting supply chains in and out of the EU added bureaucracy, delays and costs, which stands to reason. Brexit also affected the easy dynamic flow of needed skills and types of workers under the old freedom of movement regime, substituting a clunky, arbitrary, and politicised points-based system for the agile free market system. More people are retiring early, and more are suffering long-term illness because of the lingering effects Covid.

The impact of all that is to create a labour shortage, push wages up (and therefore business costs), and these have been passed on. In some forms they’ve also squeezed profits (for investment). The economy cannot grow without people to work in it.

The attempt to maintain living standards and wages in the face of a reduction in the capacity of the economy to supply goods and services (for lack of workers) made inflation inevitable. Using interest rates and higher taxes to hammer it down aren’t the best weapons in such circumstances; but, barring a much higher level of immigration, they are the only tools the authorities have at their disposal.

Mann asked back in February: “Is there a turning point already visible in the data? For the US and the Euro area, yes; for the UK, maybe stabilisation.”

She was being optimistic. The most depressing of the inflation readings is what they call “core inflation”. This strips out the more volatile elements, including food and energy prices, which should suggest it will be more encouraging than the headline rate; but, right now, it is actually going in the wrong direction. It’s really an indicator of how much of our inflation problem is “home grown”, which mostly boils down to wages costs and that labour shortage, worsened by Brexit.

At 7.1 per cent it is unsustainably high, and is accelerating. Inflationary expectations are being built into wage bargaining – as we see with the current wave of strikes – and, sad to say, even at this point shops and suppliers are finding it too easy to pass cost increases through to prices.

The dreaded wage-price spiral, which we thought we had expunged from the economy in the early 1990s, is back. To make matters worse, Sunak has unnecessarily added a second, informal political inflation target, which may have the impact of subconsciously making the Bank panic and ramp rates up performatively – risking a housing crash and wider slump.