Events, dear boy, events. That was late Tory prime minister Harold Macmillan’s possibly apocryphal response to one interlocutor who asked what kept governments awake worrying at night.
Fast forward to Hillary Clinton’s new private emails storm handing Donald Trump a vigorous lifeline just a week or so before the US presidential election. Prime Minister Theresa May being told by three top High Court judges yesterday that she cannot trigger Article 50 to start the countdown to the UK leaving the EU without parliament’s approval.
It looks like tough times postponed rather than cancelledMartin Flanagan
And, on a somewhat lesser level but still significant, the Bank of England yesterday ramping up its forecasts for GDP growth in 2016 and 2017 but sharply slashing its forecast in 2018 from 1.8 per cent to 1.5 per cent.
The reason is the much more resilient performance by the UK economy since June’s Brexit vote. But it comes with a sting in the tail.
The Bank says the slump in the value of sterling since that vote and the corollary of a jump in input prices will contribute to an expected surge in inflation to 2.7 per cent next year – nearly triple its current level. Most in the City expected inflation not to return to 2 per cent until 2020.
Meanwhile, it looks like the Bank still believes two or three years down the line that Britain’s economy is likely to suffer some of the pain and uncertainty it flagged last summer.
The Bank seems to suggest another interest rate cut to follow the one made in August in the aftermath of the Brexit vote is a bit less likely.
But the overall tone of the BoE’s inflation report yesterday, accompanying the 9-0 vote by the monetary policy committee to keep rates where they are, is that it believes the short-term picture has improved more than it thought it would, but that it still harbours strong reservations about how the economy will perform farther out.
As one analyst said yesterday it looks like tough times postponed rather than cancelled. Yesterday’s signals from Threadneedle Street are not a bombshell, but still noteworthy.
The Bank would dispute it is backtracking on its warnings about the uncertainty that is likely to drag on the economy; but that it recognises the better than expected short-term economic performance in recent months.