As I wrote on Tuesday, Reeves needs a miracle to bail her out after making so many mistakes, and there was a slim chance she might get it today.
But for that to happen, the Bank of England (BoE) governor Andrew Bailey had to wake up from his customary slumbers and take action.
I don’t know why I thought he might, because he’s never shown much life before. And he didn’t today, either.
In my view, the BoE’s rate-setting monetary policy committee (MPC) should have gone big.
This was its first meeting since the since US president Donald Trump’s “liberation day” tariffs on April 2 sent global markets into a death spiral
It’s also happened to be the day that respected, independent economic forecaster accused Reeves of creating a £57billion economic black hole.
This was the BoE’s chance to rise to the occasion.
It should have slashed base rates by 0.5%. That would have been a statement to markets, and the general public.
That bold move would have said the worst is over, we’re on your side, things are going to get better.
Of course it fell short. Under Bailey, the BoE always does.
Instead of actio, we got the measly, lazy, cowardly 0.25% cut everybody expected.
Haven’t MPC members seen the news lately? The UK is in a mess. A big rate cut wouldn’t have turned everything round, but it would have been a rare positive.
Bailey was slow to notice the inflation threat back in 2022, and he’s been equally slow to respond to the slide in prices.
Consumer price inflation fell to 2.8% in February and 2.6% in March, only slightly above the BoE’s target rate.
True, the BoE has predicted inflation will rise to 3.7% during the summer, but I have two things to say about that.
First, given that I’ve previously called the BoE the world’s worst economic forecaster, we shouldn’t put too much faith in any of its predictions.
Second, the BoE predicts interest rates will fall plunge to 2% thereafter. So what’s the problem.
And here’s a third thing.
Inflation has been pushed up by rising energy, water and food prices. Higher UK interest rates won’t affect any of those things.
But a cut would millions some much-needed breathing space, especially homeowners on variable rate mortgages, or whose cheap long-term fix is about to expire.
It would also give businesses a lift, cutting borrowing costs and helping them to absorb Reeves’s brutal Budget tax hikes.
But no. The BoE have us another quarter point cut. As it always does.
Bank rate has crept down to 4.25%, at a time when the normally sluggish European Central Bank has taken prompt action.
Eurozone interest rates are now down to 2.25%. That’s a full two percentage points below our own.
Today’s cut will save somebody with a £100,000 mortgage about £20 a month. Better than a kick in the teeth, I guess, but not much better.
It’s a massive missed opportunity.
Right now, markets don’t even expect any cut at the MPC’s meeting on June 19.
They do expect three more 0.25% cuts this year, in August, September and December.
If correct, that will cut rates to 3.5% by year end.
This is agony. It’ll hurt Reeves, and more importantly, it’ll hurt the rest of us. But what else did we expect from Bailey and the BoE?