Perhaps it’s not surprising that, the day after Guy Fawkes night, the Bank of England held off from lighting any economic fireworks at Threadneedle Street today.
No interest rate cut. No dramatic change to the economic forecast.
After all, the budget is coming up in only a few weeks and it threatens to be a very big one indeed, chock-full of tax rises and spending cuts that could cast a pall over economic growth.
As it usually does when something like that is imposing, the Bank chose to pull its head back, turtle-like, into its shell.
But there’s no escaping the fact that rather a lot is going on beneath the surface, both at the Bank and in the economy itself.
Chinese goods, cyberattacks and food prices
We are, for one thing, reckoning with the consequences of a trade war ignited by Donald Trump, which is already having a far-reaching impact on the flows of goods around the planet.
Consignments that once upon a time would pass from China to the US are now being diverted to other countries with lower tariffs, and there are few countries in the world with lower tariffs, particularly on China, than the UK.
This flood of cheap Chinese imports is becoming a notable economic factor, the Bank said in the Monetary Policy Report (MPR) published alongside its decision today.
Nor is that the only thing going on beneath the surface. For the first time ever, the Bank has had to reckon with a cyberattack having a bearing on its GDP forecasts, with the Jaguar Land Rover shutdown markedly affecting GDP in recent months.
Food inflation is proving stubbornly high – and not just any food inflation.
The Bank’s MPR recounts that “inflation among four components – butter, beef and veal, chocolate and coffee – which make up only 10% of the food CPI basket, is currently contributing nearly 2 percentage points to overall food inflation”.
Next cut in December? Or perhaps next year…
Then there are the bigger macroeconomic forces it is trying to gauge.
How worried should it be, for instance, that with inflation at 3.8%, households are increasingly coming to expect that high inflation will persist rather than coming down?
How much do those inflation expectations trigger higher wage settlements and, in turn, higher inflation further down the line?
On the flip side, the economy is hardly motoring right now. The Bank expects insipid growth of 1.2% next year.
This is a long, long way from the government’s stated ambition to have the strongest growth in the G7. And growth is, in part at least, weaker because of higher interest rates.
On balance, it’s hard not to escape the conclusion that were we not a few weeks away from a budget, the Bank would have cut rates.
But as things stand, that rate cut, heavily hinted at today, might have to wait until December or, maybe, February.