Andrew Bailey is floundering in the face of soaring inflation

Prices are rising at the fastest pace for 40 years. Real wages are falling rapidly. The cost of servicing the government's vast debts is escalating, and companies are struggling to keep up with the rising price of raw materials. Still, not to worry. Fortunately, a quarter of a century ago Gordon Brown wisely decided to hand over management of inflation to a supremely competent group of expert technocrats, so that we could have stable prices and steady growth forever - or indeed an ‘end to boom’n’bust’ as Brown would have inevitably put it. Oh, but hold on. It turns out it is not quite going to plan. In fact, while the Bank of England and its increasingly hapless governor Andrew Bailey may not be wholly responsible for the rise in inflation it has started to become painfully clear that he is floundering in the face of it.

This week, speaking at a conference in Vienna, Bailey denied that the Bank’s decision to print billions of newly minted pounds, and to slash interest rates all the way down to close to zero at the height of the pandemic had anything to do with either him or indeed the Monetary Policy Committee. ‘What I reject is the argument that in our response to Covid, the Bank's Monetary Policy Committee let demand get out of hand and thus stoked inflation,’ he argued. ‘The facts simply do not support this.’

It is, at least, a novel approach to central banking. And who knows, perhaps it could catch on. In Bailey’s view, presumably Manchester United’s failure to qualify for the Champions League had nothing to do with the 11 guys on the pitch, or their reluctance to kick the ball anywhere vaguely in the direction of the goal. The collapse of Lehman Brothers had nothing to do with a bunch of overpaid traders making wild bets on financial instruments they barely understood. And Theresa May’s failure to convert a 20-point poll lead at the 2017 general election into a majority had nothing to do with running a campaign so inept that even Jeremy Corbyn managed to look statesmanlike by comparison. The Bank has conveniently decided that rising prices are not its responsibility.

And yet, there are two problems with that argument. The first is that controlling inflation happens to be the Bank of England’s explicit mandate. It has a few other functions - printing bank notes for example - but that is by far the main one. The second is that while it might not quite be true, as Milton Friedman memorably put it, that ‘inflation is always and everywhere a monetary phenomenon’ it is still a large part of the explanation. The rising prices we are witnessing right now may well have various causes. But to deny that printing money was among them just makes you look silly.

In reality, bringing inflation already running at 9 per cent back under control is going to be hard. It would help to have a confident, articulate governor who at least looked like he was in command of the situation. Unfortunately, right now Bailey doesn’t even come close - and that is becoming more and more painfully apparent every time he opens his mouth.