British interest rates
Mark Carney ‘has done his best’, says the FT. Photograph: Justin Tallis/PA
Will the Bank of England’s cut in interest rates to an historic low of 0.25% prevent a post-Brexit recession? Is the bank’s governor, Mark Carney, a shrewd operator? Is Britain’s economy doomed?
If I read its leading article correctly, its replies to the three questions above run as follows: perhaps, maybe and possibly. Or, to borrow Chou En Lai’s famous quote: “it’s too early to tell.”
The FT argues that Carney “has done his best” by adding to the rate cut by resuming another round of quantitative easing, a “correct” decision.
But he has done so in the expectation of “higher unemployment, falls in house prices and household incomes, and a spike in inflation”, making it “highly likely that further stimulus will be needed.”
For the pro-EU paper, the situation is further proof that “Brexit represents a huge supply-side shock that will suppress investment for years.”
Carney has done what he can. Now the ball is int the government’s court: it must “deliver a well-targeted fiscal boost.”
The Guardian, which also favoured remain, the Bank of England “is at the limit of its effective policy reach” and “has bought the government some time.” So it is up to the chancellor, Philip Hammond, to show what he can do.
While warm about the call by the shadow chancellor, John McDonnell, for a cut in VAT, the paper believes “the money would be better invested in infrastructure.” It continues:
“Better still might be to treat investment in human capital as another aspect of infrastructure spending... Improving Britain’s skills base by investing in the cash-strapped further education sector; picking up the bill for apprenticeships and vocational training... supporting technical training at schools... maybe even reconsidering tuition fees and student debt - these are all ideas that could ease the deep intergenerational injustice that has been so exacerbated by booming asset prices.”
So who is to blame? Everyone else, evidently: “David Cameron’s government, the Labour party, Barack Obama, global institutions, sections of the media and, of course, the Bank itself.”
Brexit voters should be aware that “the pound has been overvalued for a very long time and that its recent fall was inevitable” and should also note the flaws in the Bank’s mix of low interest rates and quantitative easing.
Worry not, says the Telegraph: “Britain is still in a relatively good position” to deal with current economic problems. “We continue to attract huge investment from overseas - and there is no evidence yet of capital flight from the UK, despite Remainers crying wolf.”
Worries about faltering consumer confidence are the result of “Project Fear’s warnings that Britain would go to the back of the queue in trade deals, that migrants will all be sent home, that tariff walls would suddenly appear, cutting the British economy off from the rest of the world, and so on.”
The Telegraph ses Brexit in positive terms because it “gives political and economic weight to the ongoing campaign to cut business rates, slash regulations and free up consumers to invest and spend their money the way they wish.”
In the Times, Ed Conway contends that “ on the grounds that he opposed Brexit which the paper claims will “actually be a boon for our economy.” It says:
“It is satisfying to see Mr Carney admit that Brexit will not be a disaster but it remains scandalous that he did not have the honesty or integrity to do so before the referendum.”
He believes that “the greatest flaw” in Carney’s plan “is that no one is quite sure of the post-Brexit health of the economy.”
In effect, the Bank has “produced a huge insurance policy aimed at keeping the wheels of British enterprise turning. We now have to pray that it works.”
The pro-Brexit Sun accepts that “things will get a bit bumpy” but asserts: “W e’re not going to panic.” It calls on Hammond to be “one of the boldest and most radical chancellors in history.”
And how would he do that: “he should cut business taxes and regulation and lure business to Britain from across the world.”
The Daily Mirror sees “some comfort” in the Bank’s measures but is concerned that they are only “a temporary dam which may not be able to withstand more torrential forces if the government cannot negotiate a successful EU withdrawal.”
According to the collective wisdom of the national press, even if Britain is not doomed it is, at present, in a state of deep contemplation about its fate.
There is a difference between the pro-Brexiteers, who tend to see light at the end of the tunnel, and the remainers, who believe the light is behind us.