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Alex Bromer: It is not time for the Bank of England to tighten policy


As expected, Omicron presents a reversal in the market. The outlook for the IMF’s strong global recovery is falling 5.9 percent this year, and 4.9 percent in 2022.

Once again, the high intellectual absurdities of the economic and corporate elites in Davos are tossed out.

Oftentimes, markets end the year higher. This year, with Christmas approaching, there is a slow downward drift in stock markets, ranging between 1 percent and 2 percent in recent trading.

Rate hikes: The BoE’s MPC efforts to combat inflation and normalize the bank rate with last week’s increase from 0.1% to 0.25% were ill-timed.

Brent crude prices also fell 3 percent, which may prove not a bad thing in the context of inflation expectations.

Travel and hospitality companies, which are major contributors to the UK’s service-based economy, are outdoing this decline.

Government guidance from a sector that contributed £58.3 billion in total value added to the UK in 2019, the year before Covid-19, is declining.

The sight of red-toothed and clawed capitalists constantly demanding government aid is depressing.

This is particularly the case when some of the complainants, such as the Hong Kong-owned Greene King, chose to put their fate in the hands of foreign investors.

With much of the developing world still not immune to potential, new variables are a constant threat. This is why policymakers should not act in such a rash.

Chancellor Rishi Sunak’s efforts to portray himself as the custodian of fiscal responsibility via swing tax increases, including the 1.25 percent National Insurance tax, seem misplaced.

Welfare reform was important but the direction chosen was ill-advised. Post-Brexit Britain has traveled as much as you can from low-tax Singapore.

As for the “unreliable friends” who control the Bank of England’s Monetary Policy Committee, their efforts to combat inflation and normalize the bank rate with last week’s increase from 0.1 per cent to 0.25 per cent were ill-timed.

It’s hard to believe that the architect of the surge was the same Andrew Bailey who moved so quickly at the start of the UK pandemic in March 2020 to prevent scarring of the economy.

bashing the output while raising the rate at this delicate juncture is misplaced. The authorities have thrown a double whammy of taxes and interest. Contrary to IMF advice, inactivity was a virtue.

Dave’s return

By luring Dave Lewis to take over the helm of new consumer healthcare company GSK, for less than £700,000, the pharmaceutical giant has played an important role.

The former Tesco chief has the right resume when it comes to the task at hand to float a new £10bn company and keep toxic activist Elliott quiet.

In his previous life, Lewis managed global consumer products for Unilever. Everything will be decisive for GSK’s new consumer equipment. At Tesco he gained insight and reorganized supply chains from a retailer’s perspective.

The appointment of former Tesco chiefs to responsibility is fashionable, with Terry Leahy in the Morrisons chair under private equity supervision.

This is not to say that Lewis’ leadership in Tesco was heroic. Leaving in the middle of the pandemic has not been a good outlook especially as he has bought a large amount of cash including a bonus of £1.6m for a few months’ work and £13m in accumulated stock options. In his six years at the top, his salary totaled £30m.

Determined to improve the group’s cash position, he sold easily from the lucrative markets of South Korea and Thailand, making the company more dependent on the highly competitive UK where expansion opportunities are limited. Then again, no one is perfect.

defective models

Remember Brexit for jobs from London? PricewaterhouseCoopers predicted in April 2016 that 100,000 financial jobs would flee to the eurozone.

US Chancellor Oliver Wyman, who was widely cited by the Bank of England as the competent authority on the issue, predicted 40,000 job losses.

The latest data from EY Tracker shows that in the end, despite frantic efforts to win banking licenses in the European Union and re-establish asset management centers in Luxembourg, Dublin and elsewhere, only 7,400 jobs have moved abroad. Warnings from JP Morgan’s Jamie Dimon about a slow drift to the continent have proven wrong, as investment bankers and traders choose to stay.

No harm is done to them as all the predictions are for a bountiful bonus season when the bottom line of a lively trading year is calculated.

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