The Bank of England raised its discount rate by 0.75% to 3% Thursday, but accompanied the increase by a nonsensical statement that it “may” keep raising in the future, but expected inflation to “peak lower than [the peak level] priced into financial markets.” BoE Governor Andrew Bailey went a little further into Jabberwocky, saying “This is important because, for instance, it means that the rates of new fixed-term mortgages should not need to rise as they have done.” The Bank is talking down rates while raising them, and in fact, its recent burst of quantitative easing (QE) to cope with the “British bond crisis of 2022” has resulted in corporate lending rates being lower than the Bank’s discount rate by half a point, rather than slightly higher as is usual.
This is the absurd two-faced position of a central bank sharply raising its key interest rate–and not having a lower tier rate for productive lending and infrastructure, let alone a credit channel for these–while the national economy officially has sunk into a deepening recession.
