CITY AND SUBURBAN
Searching for clues in the Bank's twilit landscape, I think that our luck's running out
CHRISTOPHER FILDES
The eclipse overtook the Bank of Eng- land on Wednesday morning and cast its cal- culations into total obscurity. Its forecasters folded their petals and its economists bayed at the moon and each other. Students of its Inflation Report, searching for clues to the Bank's expectations in this twilit landscape, found themselves left to pick and mix their own. Mine tell me that the good news on inflation will quite soon be out of the way. As importers of inflation, we have been lucky lately. A strengthening pound has made for- eign goods (and holidays, too) more afford- able and the prices of the commodities we import have been weak. Now, though, the pound seems as likely to fall as to rise, and, as for commodity prices, the most important of them all, the price of oil, has doubled. As for our home-made inflation, we had half a year without the economy growing but that is well behind us now, and unemployment is at Its lowest for two decades. The clue that I follow is that shop prices follow house prices up. The Bank now expects house prices to rise twice as fast as people's incomes for the next two years. I dare say that Mervyn King, the Deputy Governor in charge of monetary policy, would pick on the same clues I do. When he opposed the last cut in interest rates, he was in a minority of one. Now the markets assume that the next move in rates will be up — soon enough, I hope, to avert another bout of the national delusion that we can all get rich by buying houses.
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